US and European shares rebounded after several down days yesterday, with Wall Street surging on a report that Germany may be satisfied with Greece committing to at least one economic reform in return for aid.
The German government may settle for a clear commitment by Greece to a measure upfront to unlock aid, Bloomberg reported, citing two people familiar with Germany’s position.
The Dow Jones industrial average rose 256.61 points, or 1.44 per cent, to 18,020.65, the S&P 500 gained 25.35 points, or 1.22 per cent, to 2,105.5 and the Nasdaq Composite added 64.29 points, or 1.28 per cent, to 5,078.16.
German bond yields hit one per cent for the first time since September as long-term inflation expectations rose, also helping lure investors back into equities despite lingering jitters over recent market swings. European shares snapped a six-day losing streak.
The pan-European FTSEurofirst 300 share index closed up 1.7 per cent compared with a 1.35 per cent rise for the MSCI all world stock index. MSCI’s broadest index of Asia-Pacific shares outside Japan finished up 0.3 per cent.
The dollar slipped to two-week lows against the yen yesterday after Japan's chief central banker said the yen was “very weak” and unlikely to fall further, prompting investors to trim huge bets against the Japanese currency.
By late morning, the dollar was down 0.46 per cent against a basket of major currencies while the euro was up 0.12 per cent against the dollar. Wild fluctuations in bond markets have sapped investor confidence in recent weeks as investors revise inflation and interest rate expectations.
A selloff of German Bunds and this week’s hefty corporate and government debt supply propelled longer-dated US Treasuries yields to their highest in more than seven months yesterday.
Markets increasingly expect the US Federal Reserve to hike interest rates before the year is out, while the European Central Bank’s stimulus programme to revive the eurozone economy is seen pushing inflation slowly towards its near two per cent target.
The US dollar index hit a three-week low, with analysts pointing to debate around the G7 summit regarding the speed of the dollar’s rise as the US prepares to end years of ultra-loose monetary policy.
Traders said investors had cut back their positions amid the volatility and said the sell-off in bonds was likely to go on.
Oil prices rose yesterday after US government data confirmed a big weekly drawdown in crude inventories and on signs that US oil production growth was levelling off after several years of sharp increases. US crude was up almost one per cent at $60.72 while Brent rose 0.5 per cent to $65.21.