LONDON – European stocks lifted and bond prices fell across the euro area on Wednesday as investors bet an earlier flight to safety sparked by fears about the spread of the Delta coronavirus variant was overdone.
With a key European Central Bank meeting on Thursday expected to convey a dovish tone and provide a further boost, the benchmark STOXX index of the region’s 600 largest shares rose 0.5 percent.
US Treasury yields rose 5 basis points (bps) in London trade and Germany’s 10-year Bund yield reversed early falls, trading 2 bps higher on the day at -0.40 percent, as a sense of calm crept back into European markets.
The rally in risk assets followed an earlier rush to safe havens such as the dollar and US Treasuries, as a renewed surge in infections globally displaced inflation as investors’ primary concern.
“The moves had gone too far,” said Jan von Gerich, chief analyst at Nordea.
“Markets have a tendency of doing that, but it’s dangerous to say it’s over for now until we see more of a stabilisation”.
With a key European Central Bank meeting on Thursday expected to convey a dovish tone and provide a further boost, the benchmark STOXX index of the region’s 600 largest shares rose 0.5 percent.
US Treasury yields rose 5 basis points (bps) in London trade and Germany’s 10-year Bund yield reversed early falls, trading 2 bps higher on the day at -0.40 percent, as a sense of calm crept back into European markets.
The rally in risk assets followed an earlier rush to safe havens such as the dollar and US Treasuries, as a renewed surge in infections globally displaced inflation as investors’ primary concern.
“The moves had gone too far,” said Jan von Gerich, chief analyst at Nordea.
“Markets have a tendency of doing that, but it’s dangerous to say it’s over for now until we see more of a stabilisation”.
Rising infections
The more positive mood in European shares on Wednesday contrasted with a 0.02 percent fall in MSCI’s broadest index of Asia-Pacific shares outside Japan, as South Korea reported a daily record of new infections.
Seoul’s KOSPI slid 0.52 percent and Hong Kong’s Hang Seng index fell 0.4 percent.
Echoing concern in equities markets over a surge in global COVID-19 infections, the dollar stayed near three-month highs on Wednesday.
“While some of the world is shrugging off rising infections as vaccination rates limit the severity of any symptoms of new cases, there are few parts of the world that can totally ignore this,” said Rob Carnell, Asia-Pacific chief economist at ING.
The dollar index was last up 0.06 percent at 93.023, with the euro down 0.04 percent to US$1.1754.
Oil prices extended gains from the previous session as improved risk appetite provided support despite data showing an unexpected rise in US oil inventories last week and a weaker demand outlook due to rising COVID-19 infections.
Brent crude futures gained 84 cents, or 1.2 percent, to US$70.19 a barrel at 1021 GMT, having hit a session low of US$68.63.