Equities in Europe rose as commodity producers benefited from higher metal prices and strong earnings. Treasury yields rose and the dollar strengthened.
The Stoxx Europe 600 index rose for a second day as the basic resources sector jumped more than 3% as iron ore surged above $150 a tonne and aluminum headed for a four-high high. month.
Rio Tinto Plc, Glencore Plc and Anglo American Plc were among the biggest gainers. BP Plc rose after posting strong earnings and announcing a share buyback.
By contrast, French lender BNP Paribas SA fell 4.5% after fourth-quarter revenue lagged cost increases, while online grocer Ocado Group Plc fell more than 11% due to disappointing annual earnings. S&P 500 futures edged higher and Nasdaq-100 contracts were little changed after Wall Street stocks ended a choppy session in the red on Monday, hurt by the tech sector.
The yield on 10-year Treasuries briefly rose above 1.95%, a level last seen in December 2019. Some investors expect it could hit 3% this year as the US Federal Reserve (Fed) struggles against the highest inflation since the 1980s. The dollar gained against a basket of peers. A sell-off in European bonds eased.
Investors await data on Thursday that should show stubbornly high US inflation. This could inject more volatility into financial markets, setting itself up for a cycle of Fed rate hikes and possible balance sheet shrinkage.
But rising yields could also support some stocks, like banks and value stocks, according to Goldman Sachs Group, Inc., amid generally strong earnings.
“Markets will get used to the tightening regime at some point,” wrote Chris Iggo, Chief Investment Officer, Core Investments at AXA Investment Managers, in a note, adding: “Revisions to growth and earnings forecasts at course of the next few months will be essential. .”
Meanwhile, Chinese state-backed funds reportedly intervened in the stock market on Tuesday, helping the benchmark rally sharply after its biggest intraday decline since August 2021. The CSI 300 index ended down just 0.6% at the close, sparing an earlier drop of 2.4 percent.
Oil’s torrid rally has taken a breather as attention turns to Iranian nuclear talks that could lead to a resumption of official crude exports from the Persian Gulf producer.
Bitcoin declined for the first time in six days, falling below $44,000.
Investors are weighing the likely broader impact of Fed policy, “particularly in credit markets,” Kristen Bitterly, head of North America investments at Citi Global Wealth, told Bloomberg Television, adding: ” This is what most investors are looking at right now in terms of what can actually inject volatility into the broader market.
Elsewhere, traders were watching a flurry of diplomacy involving French, Russian, American and German leaders, trying to assess whether tension over Ukraine could be defused.