US stocks rallied on Tuesday as traders hunted for bargains following a steep weekly decline for global shares fueled by central banks raising interest rates.
Wall Street’s S&P 500, which has fallen more than a fifth from its January peak, added 2.1 per cent as trading resumed after a holiday on Monday. The technology-focused Nasdaq Composite rose 2.6 per cent.
Shares in US energy companies rose, after selling off heavily last week despite sanctions against Russian crude pushing up global oil prices.
In Europe, the regional Stoxx 600 index added 0.4 per cent, extending gains from the previous session but remaining about 16 per cent lower for the year to date.
“Markets have been horrible,” said Patrick Spencer, vice-chair of equities at RW Baird, with the indiscriminate selling of everything [that you] tend to see in the later stages of a decline ”.
The FTSE All-World index of developed and emerging market equities fell by the most since March 2020 last week, with a 5.7 per cent decline – its tenth drop in 11 weeks. The S&P fell 5.8 per cent last week.
That came after the US Federal Reserve raised its main interest rate by 0.75 percentage points, in its first such move since 1994. Fed governor Christopher Waller then expressed support for another 0.75 percentage points rise in July, describing the central bank as “all in on re-establishing price stability” after US inflation hit a fresh 40-year high in May.
“We were overdue a bear market rally, as being down for ten out of eleven weeks is a bit extreme,” said Hani Redha, multi-asset portfolio manager at PineBridge Investments.
“It doesn’t really change the bigger picture of growth slowing down and tightening financial conditions,” he added.
In government debt markets, the yield on the benchmark 10-year Treasury note, which underpins loan pricing worldwide, added 0.06 percentage points to 3.3 per cent. The policy-sensitive two-year Treasury yield gained 0.05 percent points to 3.21 per cent. Bond yields rise as their prices fall.
The Bank of England and the Swiss National Bank also raised interest rates last week, while the European Central Bank has positioned markets for its first rise in more than a decade in July.
The Japanese yen hit a fresh 24-year low of ¥ 136.33 per dollar, pushed down by bets the Bank of Japan will remain reluctant to follow other major rate-setters into lifting borrowing costs.
Money markets predict the Fed will raise its funds rate to about 3.6 per cent by December and a majority of economists surveyed for the Financial Times see the world’s largest economy tipping into recession next year.
On Monday, Dublin-headquartered building materials group Kingspan sounded the alarm about what it called a deteriorating “mood” across its global markets.
On Thursday, global purchasing managers ‘surveys will offer clues on companies’ order volumes and how they are dealing with rising food and fuel costs caused by Russia’s invasion of Ukraine, and supply chain glitches exacerbated by China’s coronavirus lockdowns.
In Asia, a FTSE index of Asian stocks outside Japan added 1.6 per cent while the Topix in Tokyo closed 2.1 per cent higher.
Elsewhere, the euro added 0.5 per cent, to $ 1.056, after ECB president Christine Lagarde pledged to safeguard weaker eurozone nations from surging borrowing costs.
Brent crude, the oil benchmark, rose 1.4 per cent to $ 115.77 a barrel, having advanced almost 50 per cent since the start of this year.