(Bloomberg) -- Sovereign bonds extended a rebound, U.S. equity futures rose and the dollar dipped Monday, signaling calmer markets after the turmoil sparked by last week’s slide in government debt.
Treasury yields stabilized, and Australian and New Zealand debt surged. Australia’s 10-year sovereign yield slid the most in a year after the central bank doubled purchases at its regular bond-buying operation, in a fresh bid to pacify fixed-income markets.
The recovery in bonds helped S&P 500 and Nasdaq 100 equity futures advance, while stocks in Japan, Australia and Hong Kong jumped. On Friday, the S&P 500 slipped and tech stocks staged a modest rebound as a rally in Treasuries drove the 10-year yield back to 1.40%.
Most Group-of-10 currencies climbed, with the Australian and New Zealand dollars among the outperformers despite data showing China’s economic recovery slowed in February. Commodities rallied as oil breached $62 a barrel.
“With a lot of the move in yields due to the improving growth outlook and reopening prospects, risk appetite is holding up,” said Esty Dwek, head of global strategy at Natixis Investment Manager Solutions. “The pace and scale of the move in yields is more important than the absolute level, suggesting that as long as the move is gradual, risk assets should be able to absorb them.”
Global bonds have stabilized from last week’s sharp losses after central banks from Asia to Europe provided reassurance that policy support remains in place. That’s helped to pull Treasury yields back from their highest level in a year and put a floor under stocks. Investors have become jittery about the prospect of faster inflation leading to tighter policy, with traders ramping up positioning for the Federal Reserve to start raising interest rates as soon as next year.
“The market is testing the Fed and global central banks as to how serious they are here,” Al Lord, Lexerd Capital Management chief executive officer, said on Bloomberg TV. “There are growth expectations and growing inflation concerns, and that’s playing out in the markets.”
Over the weekend, the U.S. House of Representatives passed President Joe Biden’s $1.9 trillion Covid-19 aid package. The bill heads to the Senate, where Biden will need to woo Republican support or avoid losing a single Democratic vote.
There are some key events to watch this week:
Caixin China manufacturing PMI is due Monday.Reserve Bank of Australia sets monetary policy Tuesday.U.S. Federal Reserve Beige Book is due Wednesday.OPEC+ meeting on output Thursday.Fed Chair Jerome Powell to discuss the economy at a Wall Street Journal event on Thursday.The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.Beijing is set to unveil its major economic goals on March 5, when the National People’s Congress convenes for its yearly meeting.
These are some of the main moves in markets:
Stocks
S&P 500 futures rose 0.8% as of 10:26 a.m. in Tokyo. The S&P 500 Index fell 0.5%.Japan’s Topix index gained 1.7%.Australia’s S&P/ASX 200 Index rose 1.5%.Hang Seng Index climbed 1.7%.
Currencies
The yen traded at 106.57 per dollar.The offshore yuan was at 6.4739 per dollar, up 0.1%.The Bloomberg Dollar Spot Index fell 0.3%.The euro was at $1.2093, up 0.2%.The Aussie dollar rose 0.8% to 77.65 U.S. cents.
Bonds
Australia’s 10-year yield fell 27 basis points to 1.65%.The yield on 10-year Treasuries was steady at 1.41%.
Commodities
West Texas Intermediate crude rose 2.2% to $62.83 a barrel.Gold rose 0.6% to $1,743.60 an ounce.
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