Equities trimmed early gains as risk demand started to wane following the initial reaction to the central bank’s intervention
US stocks bounced in a broad-based rally on Wednesday after the Bank of England said it would buy bonds to stabilize its financial markets. Against this backdrop, Treasuries rebounded as the 10-year yield pulled back after surging past 4% for the first time since 2008. The S&P 500 jumped 2% overnight for its best day in seven weeks after notching a new bear market low. The Nasdaq Composite was up 2.05%, and the Dow jumped 1.88%.
Asian stock markets followed US counterparts higher on Thursday as investors continued to digest the Bank of England’s intervention. However, regional equities trimmed early gains as risk demand started to wane following the initial reaction to the central bank’s intervention. The Treasury 10-year yield recovered 10 basis points and the US dollar climbed across the market. Hong Kong’s Hang Seng failed to preserve early gains to finish 0.84% lower while the Nikkei 225 in Japan added nearly 1% and China’s Shanghai Composite has settled marginally below the flat-line.
In Europe, equities opened lower today as risk sentiment has deteriorated since the rally witnessed on Wall Street overnight. After a short-lived pause, bond yields are pushing higher to start European trading. US stock index futures inched lower in early pre-market deals, with S&P 500 futures losing 0.5%. On the data front, Spain’s September preliminary CPI came in at +9.0% versus +10.1% y/y expected. The headline reading came in at the lowest since May, which is a welcome development.
In currencies, the dollar is back on the offensive, adding 0.74% on the day after yesterday’s drop by 1%. The USD index found a local bottom at 112.50 to close just above the 113.00 figure. Now, the immediate resistance arrives at 114.00. As such, EURUSD has already erased a half of yesterday’s gains to settle around 0.9670 during the early European deals on Thursday. A day earlier, the pair dipped to fresh multi-year lows around 0.9535.