US equities closed higher for a fourth consecutive session yesterday, reversing early losses to settle 1.3% stronger. Financials and Technology were the best performing sectors for the day, while Utilities and Telecoms lagged.
Stronger than expected US consumer price inflation data initially led to equity market weakness, adding to concerns that the Fed may need to be more aggressive on raising rates this year. Soft retail sales data later in the session led to a tempering of this concern.
US bond yields resumed their upward momentum (prices fell) following the economic data releases – 10-year bond yields rose 7bps to settle at a four-year high of 2.91% – benefitting Financial stocks while simultaneously weighing on interest-rate sensitive sectors such as Utilities and Telecoms.
European stocks also put in a positive performance yesterday – the Euro Stoxx 50 index gained 0.9%, the German DAX index rose 1.2% and the French CAC settled 1.1% higher.
In FX markets, the dollar swung between gains and losses, initially reacting positively to the inflation data before reversing lower, settling 0.7% lower against a basket of peers. The euro settled within touching distance of the $1.25 level against the greenback.
Futures markets indicate a positive open in the region of 0.5% for European equities this morning.
Asian equities followed the lead of their US and European counterparts overnight – Japanese stocks gained 1.5% and Chinese equities rose 0.4%.