US stocks rose on Tuesday, bringing the S&P 500 to its best day since late May as traders sought bargaining after a sharp weekly decline in global stocks fueled by rising central bank interest rates.
The S&P 500 closed 2.4 percent higher during the New York session after trading resumed after a break on Monday, while the technology-focused Nasdaq Composite rose 2.5 percent. The energy and consumer sectors were among the biggest increases in S&P.
These moves have reversed some of the losses inflicted on stock markets in recent weeks. The S&P 500 blue chip index fell more than a fifth from its peak in January, leaving it in a bear market as investors worried higher interest rates would slow the economy.
In Europe, the Stoxx 600 regional index added 0.4%, increasing gains from the previous session, but remains about 16% lower for the year.
“We were overdue for a bear market rally, as the decline in 10 of 11 weeks is a bit extreme,” said Hani Redha, a portfolio manager with multiple assets at PineBridge Investments.
“It doesn’t really change the bigger picture of slowing growth and tightening financial conditions.”
Some analysts also speculate that Tuesday’s rebound may be related to hedge funds covering short positions, after last week’s short sales reached their highest level since 2008. Bloomberg reported.
“On Friday, it seemed that some low-cost technology was better. Today it is a little wider, but we still see this model. So I think short coverage is a big part of that, “said Tom Graf, head of investment at Facet Wealth.
The FTSE All-World index of shares in developed and emerging markets fell the most since March 2020 last week, with a 5.7% decline – its tenth decline in 11 weeks. S&P fell 5.8% last week.
This came after the Federal Reserve raised its key interest rate by 0.75 percentage points in its first such move since 1994. Then Fed Governor Christopher Waller voiced support for another 0.75 percentage points are rising in July, describing the central bank as “all about restoring price stability” after US inflation peaked at 40 in May.
In government debt markets, the yield on the reference 10-year government securities that underpin global loan pricing added 0.08 percentage points to rise to 3.3%. The policy-sensitive two-year yield on government bonds rose 0.02 percentage points to 3.2%.
The Bank of England and the Swiss National Bank also raised interest rates last week as the European Central Bank positioned markets for its first rise in more than a decade in July.
The Japanese yen hit a 24-year low of ¥ 136.68 against the dollar, pushed down by bets placed by the Bank of Japan will remain reluctant to follow other important regulators of interest rates when raising borrowing costs.
Money markets predict that the Fed will raise interest rates on its funds to about 3.6% by December. Most economists surveyed by the Financial Times predict the world’s largest economy in recession next year.
Surveys by global purchasing managers on Thursday will provide clues to the volume of companies’ orders and how they are coping with rising food and fuel costs caused by Russia’s invasion of Ukraine and supply chain problems exacerbated by coronavirus blockade in China. .
In Asia, the FTSE index of Asian stocks outside Japan added 1.7%, while Topix in Tokyo closed 2.1% higher.
Elsewhere, the euro added 0.2% to $ 1,053 after ECB President Christine Lagarde promised to protection of the weaker countries of the euro area of rising borrowing costs.