Stock markets and other riskier assets steadied on Thursday as investors dusted themselves down after a woeful week for the tech sector, readying for what was set to be the first quarterly drop in global equities in two years.
Banks and consumer stocks helped Europe’s main bourses 0.2-0.4 percent higher as the region built on a positive session for Asia’s heavyweight Nikkei, Hang Seng and Chinese markets.
For currencies traders, the dollar steadied too after a stronger-than-expected revision to Q4 growth data and hopes a nuclear standoff with North Korea has been averted gave it its largest daily gain in six months on Wednesday.
The tentative return of risk appetite and upcoming German inflation data also cooled safety plays like Bunds.
Benchmark yields – which move inversely to prices – on German government bonds crept back above 0.5 percent having been on a sharp slide for most of the month. Spanish yields meanwhile saw their biggest monthly fall since mid-2016.
US Treasury yield
The 10-year US Treasury yield was at 2.773 per cent after touching a near two-month low of 2.743 percent overnight amid the strains on Wall Street.
“I think most of these markets are staring at the 200-day moving average on the S&P 500 to see if it breaks,” said Societe Generale’s Kit Juckes.
“We will see if German CPI numbers (due at 1200 GMT) surprise on the upside… but I think if there is going to be another surprise in Q2 it will be yen strength again.”
Wall Street futures were pointing to a marginally higher open. All three major US indexes ended in the red again on Wednesday with $30 billion wiped off Amazon’s shares alone after reports US President Donald Trump wanted to rein in the firm’s power in online retailing.
As a set, the FAANGs (Facebook, Amazon, Apple, Netflix and Google) are still well up for the quarter, but privacy concerns after it was revealed 50 million Facebook users’ data was misused has wiped over $400 billion off the shares’ value in recent weeks.
The turbulent start to 2018 in financial markets has brought an end to one of the longest ever quarterly bull runs – and there have been few places to hide.
Investors have had it all thrown at them, from the biggest ever rise in stock volatility to rapidly escalating tensions over global trade, deepening turmoil in the White House and major tech sector wobbles.
A “melt-up” that sent the MSCI’s world share index up 8 per cent in January suddenly melted away. Now the Dow Jones, S&P 500, FTSE Nikkei and scores of other big markets are all down for the year.
“We have got to make sure (the market sell-off) …is not too prolonged because the longer this goes the higher the chance it will start to affect the man on street,” said Head of Equities at London & Capital Roger Jones.
In Asia overnight, Japan’s Nikkei ended up 0.6 per cent, Shanghai closed more than 1.2 per cent higher and Hong Kong’s Hang Seng recovered from an early wobble to add 0.3 per cent.
Helping the mood were media reports that Japan had sounded out North Korea’s government about a bilateral summit, and that Pyongyang had also discussed the possibility of a broader meeting with other global leaders.
Beijing had said on Wednesday that North Korea’s leader Kim Jong Un had pledged his commitment to denuclearisation at meeting with Chinese President Xi Jinping.
The greenback was 0.3 per cent lower against the yen – often sought in times of market turmoil and political tensions – at 106.57 yen on Thursday. The greenback had rallied 1.4 per cent on Wednesday on perceived progress over the North Korea issue, having set a 16-month trough of 104.560 on Monday.
The dollar index versus a basket of six major currencies was flat at just over 90 after reaching a one-week high of 90.147.
“Expansionary US fiscal policy should support global trade, but markets will remain attentive to further tensions as the China-US trade saga continues to unfold,” wrote economists at ANZ.
The euro was 0.15 per cent higher at $1.2332 after losing 0.75 per cent on Wednesday. Sterling was flat at $1.4080 after shedding 0.5 per cent overnight on news British retail sales fell in March for the first time in five months.
It has however had its best quarter since early 2015, and not only against a dollar which is locked in its worst run since the financial crisis, but also versus the euro .
In commodities, US crude futures rose 0.4 per cent to $64.64 a barrel, partly recovering after dropping 1 per cent the previous day when data showed US crude inventories unexpectedly rose last week.
Brent climbed 0.3 per cent to $69.73 a barrel after losing 0.8 per cent on Wednesday. Brent has risen more than 6 per cent this month with OPEC and other suppliers expected to continue withholding output for the rest of the year and potentially into 2019.
Gold was treading water at $1,323 an ounce. Another sign of the stress in markets is that it is set for its third straight quarterly gain.