LONDON – European shares jumped on Monday as bond yields stayed below their recent spikes, while risk assets also rallied and Wall Street futures indicated the optimism would continue into the US session.
The rise in European shares followed solid gains in Asian stock markets and saw the STOXX 600 up 1.2 percent by 1202 GMT. London’s FTSE 100 1.1 percent higher and Germany’s DAX up 0.7 percent.
The MSCI world equity index, which tracks shares in 49 countries, rose 0.4 percent, recovering from the previous session’s multi-week low.
The much-anticipated US$1.9 trillion COVID-19 relief bill was passed in the US House of Representatives on Saturday, and now moves to the Senate.
In the bond market, key yields fell from highs seen last week when market participants became wary that when economies re-open from coronavirus lockdowns a combination of massive government stimulus and pent-up consumer demand will cause inflation to accelerate.
The US 10-year treasury yield was down around 3 basis points at 1.429 percent at 1207 GMT, having dropped from Thursday’s one-year high of 1.614 percent – although it did edge up slightly overnight.
Germany’s benchmark 10-year Bund yield was down around 5 basis points, also below last week’s spike.
“I think more than anything, people were spooked at the speed of the rise, rather than anything else,” said Michael Hewson, chief market analyst at CMC Markets UK.
“The markets are pricing in a (US) rate hike for next year, and a couple in 2023, and that’s what the Fed needs to push back against – and they haven’t done that aggressively enough.”
He said markets were being boosted by expectations that US Federal Reserve officials due to speak in coming days will provide stronger verbal signals against the rise in bond yields.
“There is little doubt in my mind that central banks will eventually lean quite hard against a sustained rise in yields,” wrote Deutsche Bank strategist Jim Reid in a note to clients.
“They simply can’t afford to see it happen with debt so high.”
PMI data for February is also in focus this week. Germany’s factory activity rose to its highest level in more than three years last month.
Manufacturing in Japan grew at its fastest pace in more than two years in February, as strong orders led to the first output rise since the start of the pandemic.
Oil prices jumped on Monday, with Brent crude futures and US West Texas Intermediate (WTI) crude futures both up around 1 percent at 1221 GMT.
Front-month prices for both contracts touched 13-month highs last week. Both contracts ended February 18 percent higher.
The dollar rose, gaining 0.3 percent against a basket of currencies by 1222 GMT. The Australian dollar – which is seen as a liquid proxy for risk appetite – recovered some recent losses.
Wall Street looked set for a higher open, with S&P 500 futures up 1.1 percent. Nasdaq futures were up 1.3 percent at 1223 GMT, suggesting a recovery for tech stocks.
Bitcoin recovered some recent losses, up 5 percent at around USUS$47,676 at 1227 GMT.
Also helping sentiment was news that deliveries of the newly approved Johnson & Johnson COVID-19 vaccine should start on Tuesday.