US equities swung between small gains and losses in early trade on Tuesday, as markets continued to settle following the biggest loss on Wall Street in more than two months last week.
The blue-chip S&P 500 fell 0.1 per cent, while the tech-heavy Nasdaq rose 0.2 per cent. This week US indices have steadied after their biggest weekly tumble in two months.
Markets are in a “blackout period” ahead of the release of US labour market data early next month, said Steven Blitz, chief US economist at TS Lombard. “There’s nothing to trade on except kernels of data but the February employment numbers are more important than inflation numbers as employment is the thing that leads to inflation — and since goods inflation is higher now, we need more downward pressure on services, which wages are a big part of.”
European equities gave up early gains to trade slightly lower on the day. The region-wide Stoxx 600 fell 0.4 per cent and Germany’s Dax was 0.1 per cent lower.
The moves followed stronger than expected inflation data from France and Spain, two of the eurozone’s largest economies.
The readings added to investors’ concerns that the European Central Bank would need to extend its aggressive policy of raising interest rates for longer to tame inflation. Yields on European government bonds rose as prices fell, with the yields on German Bunds hitting a fresh 12-year high.
Investors in the swaps market expect the ECB interest rates to peak at just below 4 per cent by the end of the year. The yield on 10-year German Bunds rose 0.09 percentage points to 2.67 per cent, its highest level since June 2011.
“The question is for how long interest rates will increase and to what level, as well as if there will be a spreading effect from the labour market,” said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers.
Yields on 10-year US Treasuries rose 0.03 percentage points to 3.95 per cent, while the two-year benchmark, which is more sensitive to monetary policy, gained 0.01 percentage points, to 4.79 per cent.
The dollar index, which measures the greenback against a basket of six peer currencies fell 0.2 per cent, while the euro rose 0.3 per cent. Sterling gained 0.6 per cent, after rising 1 per cent on Monday as the UK and EU reached a deal on post-Brexit trading rules.
Brent crude rose 1.6 per cent to $83.73 per barrel, while WTI, the US equivalent, gained 1.9 per cent to $77.12 per barrel.
Hong Kong’s Hang Seng index fell 0.8 per cent, while China’s CSI 300 rose 0.6 per cent.
