Stock markets in the US are driving higher today as government bond yields have retreated from their recent peaks. Earlier this week, the US 10-year yield hit 1.89% - the highest in over two years - and that ignited a decline in equities as the rise in yields suggests that higher interest rates are a possibility. Bond yields have cooled, and in turn the level of fear running through equity markets has faded. The S&P 500 has rebounded from the seven-week low that was posted yesterday. The NASDAQ 100 is the outperformer of the US indices, but then again, it suffered the largest losses amid the recent bout of selling – the technology heavy index fell to a three-month low yesterday. Even though the US 10-year yield has pulled back to 1.83%, the broader uptrend remains in place. In addition to that, the speculation the Federal Reserve will hike rates three or four times this year is still in circulation, so it a possibility the equity bears will return in the days ahead. Eurozone stocks are up a little too as German and French bond yields have dipped. The FTSE 100 is being weighed down by the fall in oil stocks like BP and Royal Dutch Shell.
The pivot towards a more hawkish stance from the Fed has been brought about by a strong recovery in the economy, although there was some mixed data from US today. The jobless claims reading jumped from 231,000 to 286,000, the highest level in 13 weeks, it could be an early warning the US recovery is faltering, on the other hand, the Philly Fed manufacturing index came in at 23.2, up from 15.4 in the December. It has been in quiet day for the US dollar as it is now a little weaker. The pound is performing well across the board as GBP/USD is up 0.3%, and GBP/EUR topped 1.2000 for the first time since February 2020.
Gold was playing catch up with silver this week, and today the yellow metal hit a two-month high. Silver set a fresh two-month high also, and the subdued US dollar played a role in the rally seen in the metals. Industrial commodities such as copper, platinum, and palladium are all showing respectable rallies due to the overall risk-on mood in the markets.