Nasdaq futures and US Treasuries rallied as a powerful “rotation” caused by a brightening global economic outlook paused on Tuesday.
Futures tracking an index of the biggest 100 stocks on the technology-focused Nasdaq Composite jumped 2 per cent in midday dealings in Europe. S&P 500 futures rose 0.9 per cent.
The pick-up comes after the Nasdaq Composite had slumped into correction territory — a 10 per cent fall from its February peak — with big tech names such as Apple and Tesla sliding.
Stocks that underperformed at the height of the pandemic — such as banks and airlines — have begun picking up steam and leading the market.
Europe’s bank and energy sectors have risen 20 per cent and 13 per cent, respectively this year. “We can certainly call this rotation,” said Jim Reid, research strategist at Deutsche Bank.
The broader Stoxx Europe 600 benchmark recovered from a morning slide to be up 0.5 per cent by midday, while London’s FTSE 100 also added 0.5 per cent and Frankfurt’s Xetra Dax rose 0.3 per cent, extending the German index’s record high hit a day earlier.
“The weaker opening this morning is an overhang over concern about interest rates from the previous day,” said Armin Peter, global head of debt syndicate at UBS. “But I can see the underperformance of tech extending for a little longer and European equities will outperform US indices, because of the relatively lower share of tech stocks in Europe’s indices.”
The recent rout in government debt paused, helping to relieve the upward pressure on American borrowing costs. The benchmark 10-year Treasury yield, which moves inversely to price, fell 0.06 percentage points to 1.53 per cent.
Bond traders said they would scrutinise the results of a three-year Treasury auction later on Tuesday. It marks the first of three crucial US bond deals this week that follow a grim auction of seven-year Treasuries late last month that added to recent volatility in the debt market.
Investors have offloaded Treasuries this year as President Joe Biden has promoted his $1.9tn coronavirus relief package, which is expected to pass through the Democrat-controlled House of Representatives on Tuesday. Expectations that the huge stimulus would trigger a faster economic recovery and stoke inflation have driven the selling of US government debt.
According to the OECD, the scale of the US stimulus package will add 1 percentage point to global economic growth in 2021.
In Asia, China’s CSI 300 closed down 2.2 per cent, Hong Kong’s Hang Seng rose 0.8 per cent and South Korea’s Kospi lost 0.7 per cent.