Wall Street stock markets wavered on Wednesday following a volatile start to the week as fears about the Delta Covid-19 variant were tempered by investors buying back in to equities due to a perceived lack of moneymaking alternatives.
The S&P 500 opened 0.3 per cent higher after the blue-chip share index dropped 1.6 per cent on Monday before rising by almost the same amount in the following session. The technology-focused Nasdaq Composite traded flat.
The seven-day rolling average for new coronavirus cases in the US has more than doubled from several weeks ago, according to Johns Hopkins University, while the US Centers for Disease Control and Prevention said on Tuesday that the Delta variant accounted for 83 per cent of new infections in the US.
“If the reopening slows down because infection rates stay high and governments decide to postpone total relaxation of safety measures, that creates uncertainty around economic growth and business conditions,” said Tancredi Cordero, founder of investor advisory group Kuros Associates.
“But a lot of our clients are staying with equities because the alternatives are poor,” he added, describing government bonds as providing “a lot of volatility for not much of a return”.
The yield on the benchmark 10-year Treasury bond, which moves inversely to its price, added 0.06 percentage points to 1.265 per cent on Wednesday, staying around its lowest level since early February.
This yield, which influences companies’ debt costs and the returns investors expect from other assets, has been on a wild ride for most of the year as fears of the US economy overheating and the Federal Reserve tightening monetary policy tussled with pandemic-driven demand for the haven debt security. The real yield on the 10-year Treasury, which adjusts the nominal income return for inflation, is about minus 1 per cent.
European equities outshone Wall Street’s performance on Wednesday ahead of a European Central Bank meeting on Thursday, where policymakers are expected to commit to continued monetary stimulus.
The Stoxx Europe 600 share index rose 1.4 per cent, while the euro dipped 0.2 per cent against the dollar to $1.1762 to around its lowest since early April, as traders banked on the ECB ramping up its bond-buying plans beyond the end of its €1.85tn pandemic emergency purchase programme at a meeting on Thursday.
“We think the ECB is going to extend asset purchases in some way and signal a timeline for rate hikes that puts them even further into the future,” said Christopher Jeffery, head of inflation and rates strategy at Legal & General Investment Management.
The dollar index, which measures the greenback against a basket of currencies, rose 0.1 per cent to its highest level since early April — boosted by the weaker euro as well as renewed pandemic concerns.
Brent crude, the international oil benchmark, gained 2.5 per cent to $71.12 a barrel, but remained at its lowest level since early June following an agreement by members of producer group Opec+ to raise production by 400,000 barrels a day each month from August.
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