Global stocks rose, supported by falling oil prices and stable bond yields hovering near multi-decade highs.
The S&P 500 is moving closer to its first record high since August, as stable Treasury yields and lower oil prices have helped ease inflation concerns. Futures contracts linked to the index rose 0.2% after closing slightly below a new record high in the previous session. Nasdaq 100 futures also climbed 0.2%, suggesting the index is poised to continue its advance into record territory.
Brent crude fell below $100 a barrel, while U.S. Treasury bond prices rose slightly after 10-year bond yields hit their highest level since 2002 in the previous session.
The US dollar was steady, gold prices were little changed, while Bitcoin fell 0.6% to $85,285.
In Europe, the Stoxx 600 index rose 0.7%, heading for its first three-day winning streak in a month. The region's bond prices rebounded from recent multi-decade lows, with French and Italian bonds, which have frequently underperformed their peers, leading the gains. The euro stabilized after falling to a 17-month low on Monday.
On the other hand, the MSCI Asia Pacific Index rose by 0.3%.
Markets focus on catalysts
Stock markets have largely shrugged off the impact of the Federal Reserve's interest rate hike last month, rising energy costs, and renewed inflation concerns that have sent global bond yields soaring.
Instead, investors focused on strong earnings, resilient consumer spending, and a surge in AI-related investments, factors that pushed the indices to higher levels.
Stefan Kemper of BNP Paribas Wealth Management in Germany said that earnings are driving gains this year, not valuation multiples. He added: With earnings per share adjustments remaining strong, supported by guidance being raised above average in the US, we see room for this trend to continue, according to Bloomberg.
Stock market calm masks pressures in bonds
Hitoshi Asaoka, chief strategist at Asset Management One, said: “Rather than this being just a straightforward rally in stocks with a risk appetite, I think there is also an element of risk aversion or defensive investing.”
He added: It seems to some extent that there is a rush to quality in response to higher returns, as money is flowing into companies with strong profits, low reliance on borrowing, and relatively limited sensitivity to the broader economic cycle.
Regarding equities, market breadth remains a major concern for investors. The percentage of US stocks trading above their 10-, 50-, and 200-day moving averages has fallen to levels not seen since March.
Lisa Shalit of Morgan Stanley Wealth Management, as quoted by Bloomberg, said: “The relative calm in the stock market amid the perfect storm in the bond market can be understood given the accelerating economic growth and the insensitivity of the AI boom to interest rates.”
