Markets inch up after wild tech reboot

Market still wary of bond yields ahead of auctions

 

World share markets inched higher on Wednesday after a stunning reboot in US tech stocks, while the dollar and benchmark government yields both ticked up ahead of a key US Treasury auction and inflation reading later.

But gains were subdued after Tuesday’s 20 per cent surge in electric car doyen Tesla, 4 per cent jump in the Nasdaq and biggest one-day gain for global heavyweights Amazon and Microsoft in well over a month. Asia had bounced back from a two-month low as China’s markets shrugged off their recent central bank policy tightening worries and Europe was helped early on by a new all-time high for Germany’s Dax.

The dollar and bond yields ticked up too. Traders were focused on the U.S. bond auction and inflation data later, as well as Thursday’s European Central Bank meeting where it is expected to respond to the recent jump in borrowing costs. Mikhail Zverev, head of global equities at Aviva Investors, said Tuesday’s wild moves in big US tech underscored how volatile markets, which are increasingly dominated by super-sized passive funds, are likely to be this year as the world tries to reset after the Covid-19 pandemic.

“The winds are blowing harder now. The world isn’t a more dangerous place, a mild increase in interest rates is not a cataclysmic event... but there is now the big-herd mentality with a greater propensity for rotations,” he said. “They are moving more frequently, they are moving faster and they are leaving a trail of inefficiency,” leaving markets vulnerable to big swings, he added. Gains in Asian stocks overnight came after Chinese shares had fallen to their lowest levels since mid-December the previous day on the prospect of tighter policy and a slowing economic recovery. News that a $1.9 trillion US coronavirus relief package was nearing final approval had sparked a global spike in bond yields on Monday. That had pushed the Nasdaq more than 10 per cent below its February 12th closing high, confirming a correction for the index. - Reuters