© Reuters. FILE PHOTO: A woman walks past a man examining an electronic board showing Japan’s Nikkei average and stock quotes outside a brokerage house, in Tokyo, Japan, March 20, 2023. REUTERS/ Androniki Christodoulou/File photo
By Amanda Cooper
LONDON (Reuters) – Global stocks rose on Tuesday, in line with a pullback in bond yields after Federal Reserve officials signaled the recent rise in yields could justify caution on interest rates, while that oil fell, but violence in the Middle East generated nervousness in operations. .
The MSCI All-World Index rose for the fifth day in a row, up 0.5%, after hitting five-month lows last week, thanks in part to a 1.4% rise in the European index.
E-mini futures rose between 0.1% and 0.2%, while Treasuries staged a powerful rally, catching up with falling yields in global bond markets on Monday, when The US market was closed for a holiday.
The rush to perceived safe-haven assets like the dollar, gold and government bonds at the start of the week eased somewhat, while oil prices, which were up more than 4% at one point on Monday, retreated.
But investors were closely monitoring military clashes between Israel and the Palestinian Islamist group Hamas, after the latter unleashed a surprise attack over the weekend that killed hundreds of people and many were kidnapped.
The Israeli military has since said it called up an unprecedented 300,000 reservists and was imposing a complete blockade of the Gaza Strip, raising expectations of a possible ground attack.
“Geopolitical tensions are a huge problem for markets, simply because the range of outcomes is very wide and therefore, unless there is a clear direction of travel and development, it is very difficult to decide where prices should go” said Kallum Pickering, an economist at Berenberg. saying.
“The markets are telling us right now that we shouldn’t worry about an oil shortage, which is fair, and that there is – I would say – a modest increase in demand for safe havens.”
Israeli markets and stocks of companies exposed to Israel have been hit hard. The shekel, which hit a near eight-year low against the dollar the previous day, was down 0.3% on the day, while the cost of insuring against sovereign default risk rose to its highest level since 2016.
THE FED AND YIELDS
Government bonds, which investors tend to turn to in times of geopolitical or financial crisis, have witnessed one of their worst declines in years in recent weeks, given the perception that interest rates could remain much higher. for much longer, an environment that typically does not favor fixed income assets.
The yield on the 10-year U.S. Treasury bond hit its highest level since the financial crisis last week, but fell sharply on Tuesday after top Fed officials signaled that the recent rise in Treasury yields could deter the central bank to raise rates further.
“Based on Monday’s comments from the Federal Reserve, the market is starting to think that the central bank pays more attention to bond yields after all,” said ING strategist Chris Turner.
“However, we suspect this may not be a defining story for the bond market, as no central bank likes to be cornered by what bond yields mean for monetary policy.”
It was last down 11 basis points on the day to 4.676%, nearly 30 basis points below Friday’s highs of 4.895.
The dollar was stable against a basket of major currencies, after rallying on Monday.
Oil prices fell after rising more than 4% on Monday. fell 0.1% to $88.14 a barrel, while US futures were steady at $86.49.
fell 0.2% to $1,860 an ounce, after trading at one-week highs on Monday.
Adding to the jitters in Asian markets, China’s largest private property developer, Country Garden Holdings, warned that it may not be able to meet all of its overseas payment obligations when due or within relevant grace periods.
