- Eurostoxx +0.8%
- Germany DAX +0.6%
- France CAC 40 +0.5%
- UK FTSE 100 +0.5%
- Spain IBEX +0.8%
- Italy FTSE MIB +1.0%
European stocks are bouncing at the open today, but I would be careful about reading too much into the early moves just yet.
This looks more like a relief bounce after yesterday’s pressure than the start of any cleaner risk-on move. Oil prices are easing a little again, which takes some of the immediate pressure off the inflation story. So, that is giving equities a bit more breathing room. WTI crude is down 1.3% to $93.55 on the day.
The bigger problem though, is still the bond market. 10-year Treasury yields surged towards 5.20% yesterday, its highest level since 2007, while 30-year Treasury yields hit 5.50% for the first time since 2004. That is a rather uncomfortable backdrop for equity valuations, particularly if yields continue to push higher from here.
As such, I would characterise the broader market mood as one of relief rather than outright optimism.
For now, US futures are also helping to provide some backing to this relief bounce. S&P 500 futures are up 0.1% and Nasdaq futures up by 0.4%, though there is a caveat to tech sentiment as Meta is carrying a lot of the weight in trading this week. The tech giant saw its shares surge by another 4% overnight on the back of the launch of its Muse AI, which investors are still in the midst of evaluating.
Overall, the macro backdrop seems firmly in control. Lower oil prices and Meta’s outlier performance is helping to keep the broader market mood calmer. But unless bond yields stabilise, the danger that triggered the recent selloff is still very much present.
This article was written by Justin Low at investinglive.com.