European stocks are opening higher on Wednesday, finding some relief after the recent selloff driven by surging oil prices and sharply higher bond yields.
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Eurostoxx +0.5%
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Germany DAX +0.3%
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France CAC 40+0.3%
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UK FTSE +0.4%
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Spain IBEX: +0.6%
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Italy FTSE MIB +0.6%
The improvement to start the day comes as some of the pressure from the two biggest market pain points eases.
Oil prices are pulling back after their latest surge, with Brent slipping back under $108 this morning while 10-year Treasury yields have moved back just below 5% after briefly breaching that threshold yesterday. The latter in particular is arguably helping to take quite a bit of the immediate pressure off equity valuations.
The developments above is allowing European stocks to recover from Tuesday’s three-month low, where banks and other rate-sensitive sectors had come under heavy pressure.
The rebound today is broad-based but can be coined as more of a breather as traders and investors now turn their attention to the Fed rate decision later in the day.
US futures are also pointing modestly higher, with S&P 500 futures up 0.3% and Nasdaq futures up by 0.5% to start the day. That also marks a light bounce after Wall Street fell on Tuesday as oil and Treasury yields climbed in the day before.
All in all, this still looks more like a relief bounce than any outright shift back to risk-on. Markets are firmly focused on the Fed decision, with a 25 bps rate hike heavily priced in. The bigger question will be what the Fed signals about further tightening as inflation pressures continue to remain elevated.
This article was written by Justin Low at investinglive.com.