Global stocks soared on Monday as investors digested new optimism from the US Treasury’s top economist that inflationary pressures should ease in 2022 due to weaker demand for goods, easing supply bottlenecks and a receding coronavirus pandemic. Wall Street closed higher on Monday, coupled with an earlier rise in European stocks, which helped stabilize investor sentiment after a series of volatile sessions.
In a statement released alongside quarterly Treasury borrowing estimates, Assistant Economic Policy Secretary Ben Harris said he expects energy prices to stabilize in 2022, but geopolitical instability could drive up prices. Still, investors said the backdrop for equities remains uncertain as other central banks tighten policy – the Bank of England is expected to hike rates again on Thursday – and a further rise in oil prices adds to inflation concerns.
The pan-European STOXX 600 index rose 0.72%. The Lunar New Year holiday has created difficult business conditions in Asia. MSCI’s broadest Asia Pacific ex-Japan equity index closed up 1.11%.
On Wall Street, the Dow Jones Industrial Average rose 1.18%, while the S&P 500 gained 1.89%. The tech-heavy Nasdaq gained 3.41% but bore the brunt of selling and is down 14% from last year’s record high. The MSCI World Index, although up on Monday, remains down 6.2% in January – the worst start to the year since 2016. Prior to Friday’s rebound, the index was heading for its worst January since the 2008 global financial crisis. It last gained 1.8%
“This is not the classic sell off affecting underperforming lower quality companies. This sell off is not driven by fundamentals but by central bank action at a time of very strong growth,” said Flavio Carpenzano, Chief Investment Officer at Capital Group. “For years you were like a spoiled child, you could get all the money you wanted and for free and you could buy whatever you wanted, you didn’t care so much about quality. Now that’s the Conversely, you have to be more disciplined, so you have to look carefully at the valuation,” Carpenzano added.
The standoff over Ukraine also remains a thorn in the side of markets, which fear a Russian invasion could cut off vital gas supplies to Western Europe. Moscow denies any invasion plan. STABLE OIL
Oil prices ended January up around 17%, posting their biggest monthly rise in a year, boosted by a supply shortage and political tensions in Eastern Europe and the Middle East. . The most active Brent contract, for April delivery, traded 74 cents higher, or 0.8%, to settle at $89.26 a barrel. The first-month contract, for March delivery, which expired at the end of the session, rose $1.18, or 1.3%, to end at $91.21.
U.S. West Texas Intermediate crude rose $1.33, or 1.5%, to close at $88.15 a barrel. In economic news, data showed that eurozone economic growth slowed quarter-on-quarter in the last three months of 2021, as expected.
Data released on Sunday showed Chinese factory activity slowed in January as a resurgence in COVID-19 cases and severe lockdowns hit output and demand. Yields on the most inflation-sensitive US Treasuries hovered near their highest levels since February 2020 on Monday, capping a bond market selloff this month that by some measures is the worst in 13 year.
The 10-year Treasury yield rose 0.9 basis points to 1.789%, while the two-year US Treasury yield, which generally moves in line with interest rate expectations, rose. rose 0.5 basis points to 1.177% “The bond market may have settled into a flattening yield curve, reflecting an expectation of several rate hikes over the course of this year, then at least a pause while the economy adjusts,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
Like the Bank of England, the European Central Bank is meeting this week but is expected to stick to its argument that inflation will recede over time. Investors will be watching major U.S. data releases this week, including the ISM readings on manufacturing and services, and the January jobs report.
The overall U.S. payroll number is expected to be low given an increase in COVID-19 cases and unfavorable weather conditions. The median forecast is for a rise of just 155,000, while forecasts range from a gain of 385,000 to a decline of 250,000. employment this week, pausing after a furious rally that took the currency to a year-and-a-half high on Friday.
The dollar index fell 0.646%, with the euro up 0.89%, putting it on track for its biggest daily decline since Jan. 12. On the month, the greenback rose 1.4% after hawkish noise from Fed Chairman Jerome Powell last week bolstered the US Dollar. “A mix of consolidation and position adjustment late in the month pushed the dollar off its highs,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
“A week full of upcoming events threatens to keep market volatility high. The dollar appears to have topped for now as Friday’s jobs report is expected to show another month of hiring. lukewarm,” added Manimbo.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)