European shares extended gains from the previous session on Tuesday, after global stocks fell sharply on central banks tightening monetary policy.
The Stoxx Europe 600 was up 0.6% in early trade after gaining on Monday, but still ended the year down nearly 17%. The FTSE index of Asian shares outside Japan rose 1.3%, while Tokyo’s Topix closed up 2.1%.
Futures markets imply that Wall Street’s benchmark S&P 500 stock index, which has fallen by more than a fifth from its January peak, will open 1.4% higher in New York. U.S. markets were closed on Monday for a holiday.
U.S. government debt was weighed by the prospect of further monetary tightening by the Federal Reserve as analysts debated whether stocks could slide further.
“The market has been terrible, selling everything indiscriminately,” said Patrick Spencer, vice chairman of equities at RW Baird. [that you] Tends to be seen in the later stages of the decline”.
However, he warned that “there’s still a lot of negative sentiment” as investors remain nervous about the next quarterly earnings season showing inflation lowering consumer demand and corporate profits.
The FTSE All-World index, which measures stocks in emerging and developed markets, fell last week by the most since March 2020, falling 5.7%.
Earlier, the Fed raised its key interest rate by 0.75 percentage points, the first such move since 1994.Fed Governor Christopher Waller later expressed support up another 0.75 percentage points In July, after U.S. inflation hit a 40-year high in May, the central bank described it as “all-in on restoring price stability.”
Two-year U.S. Treasury yields rose 0.06 percentage point to 3.22 percent, rising as debt instrument prices fell and tracked monetary policy expectations. The yield on the benchmark 10-year Treasury note rose 0.04 percentage point to 3.28%.
Money markets predict the Fed will raise its funds rate above 3.6% by December, and most economists polled by the Financial Times believe the U.S. is the world’s largest economy into a recession next year.
Dublin-based building materials group Kingspan on Monday raised the alarm About its so-called deteriorating “sentiment” in global markets.
Meanwhile, on Thursday, a survey of global purchasing managers will provide clues on companies’ order volumes, hiring plans and how they are coping with rising food and fuel costs due to supply chain failures exacerbated by Russia’s invasion of Ukraine and China’s coronavirus lockdowns .
“There has been a lot of actual, not just forecasted, economic weakness,” said Tan Kai Xian of research firm Gavekal. “The housing construction sector has been severely hurt, and manufacturing and retail have also started to soften.”
However, the return of risk assets on Tuesday reduced traders’ demand for the greenback. The U.S. dollar index, which measures the greenback against six other currencies, was down 0.4% but remained near its year-to-date highs hit last week.
Brent crude, the oil benchmark, rose 0.7% to $114.93 a barrel, having gained nearly 50% since the start of the year.