Global stocks rise and the Bund rallies as traders assess growth prospects
Global equity markets rallied on Monday, with strong gains for tech stocks offsetting concerns over a possible escalation in sanctions against Russia for its actions in Ukraine.
The tech-dominated Nasdaq Composite Index climbed 1.9%. Twitter jumped more than a quarter after filings revealed Tesla chief executive Elon Musk had become the social media group’s largest shareholder, while Chinese tech groups such as Pinduoduo and JD.com jumped on optimism that they could avoid being delisted from US markets.
More than 250 Chinese companies risk losing their listing in the United States under rules that require companies to provide detailed audit documents to the US accounting watchdog. Chinese privacy laws previously prevented local companies from sharing documents with foreign authorities, but on Saturday the China Securities Regulatory Commission said it would change the law.
The Golden Dragon Index of Chinese companies listed in the United States climbed 7.4% on Monday. Hong Kong’s Hang Seng Index climbed 2.1%. Markets in mainland China were closed for a public holiday.
Gains in cyclical tech and consumer stocks – which include companies like Amazon and Tesla – pushed Wall Street’s benchmark S&P 500 index up 0.8%, despite weakness in most other sectors .
The caution of investors hitting non-tech stocks was most evident in government bond markets, with German and UK government bond prices soaring. The yield on the 10-year German Bund, which falls when prices rise, fell 0.06 percentage points to 0.51%, while the equivalent yield on the British gilt fell 0.08 percentage points to 1 .55%.
Agnès Belaisch, chief European strategist at Barings, noted that a lack of liquidity in the European sovereign debt market meant that individual transactions motivated by “the EU’s escalating tone towards Russia” had a ” strong impact”.
French President Emmanuel Macron on Monday issued calls to ban the import of Russian oil and coal after reports of atrocities in occupied Ukrainian cities.
The BDI, Germany’s main business lobby, also warned that “the economic outlook looks very bleak” due to the effect of the war in Ukraine on consumer confidence and investment, as well as bottlenecks in supply chain bottleneck.
In the United States, meanwhile, the yield on short-term debt has remained slightly higher than that on longer-term debt, a phenomenon known as the “inverted yield curve”, which is often considered to be a harbinger of an impending recession.
The two-year yield fell 0.01 percentage point to 2.42%, while the 10-year yield rose 0.03 percentage point to 2.41%.
US government bonds recorded their worst quarter on record in the first three months of this year as traders anticipated a series of rapid interest rate hikes from the Federal Reserve.
Still, Aneta Markowska, chief financial economist at Jefferies, said there was “little evidence that we are in a late-cycle economy” because recessions tend to coincide with periods of “corporate restructuring , triggered by significant margin compression”.
“Margins have only started to contract and are still near cycle highs,” she added. “It doesn’t sound like a business sector that’s about to embark on a cost-cutting campaign.”
This article has been updated to reflect that the Chinese CSI 300 index was closed on Monday.
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