Benchmark U.S. Treasury yields rebounded off of 15-month lows on Tuesday while global stock markets broadly surged after a two-session swoon, as risk appetite improved after worries of an economic recession had clouded trading since late last week.
Oil prices also jumped, while safe-haven assets such as gold and the Japanese yen lost ground.
Markets have been rattled since Friday, when the 3-month U.S. Treasury yield exceeded the yield on the 10-year note, an inversion of the yield curve that is widely seen as an indicator of a recession.
“After a couple of days where investors focused solely on the chances of recession in the U.S. and concerns about slower growth, today is not surprisingly a day where they rethink those probabilities,” said Kate Warne, investment strategist at Edward Jones in St. Louis.
“What we have is lots of signs of slower growth,” Warne said. “We actually have very few signs of recession.”
Wall Street’s finished higher.
Based on the latest available data, the Dow Jones Industrial Average rose 140.9 points, or 0.55 per cent, to 25,657.73, the S&P 500 gained 20.1 points, or 0.72 per cent, to 2,818.46 and the Nasdaq Composite added 53.98 points, or 0.71 per cent, to 7,691.52.
The S&P 500 financial index gained just over 1 per cent after five straight sessions of losses.
Canada’s main stock index advanced on Tuesday, led by sharp gains in energy stocks as oil prices briefly rose above $68 a barrel on OPEC supply cuts and expectations of lower U.S. inventories.
The Toronto Stock Exchange’s S&P/TSX composite index was up 89.30 points, or 0.56 per cent, at 16,155.16.
Of the 11 major TSX sectors, the energy sector’s 1.7-per-cent climb was the steepest.
Crescent Point Energy Corp. rose 5.2 per cent, while Encana Corp. and Baytex Energy Corp. added 4.3 per cent and 4.2 per cent, respectively.
The financials sector gained 0.3 per cent, while the industrials sector rose 1 per cent.
The materials stocks, which includes precious and base metals miners and fertilizer companies, rose 0.9 per cent after erasing early losses.
MSCI’s gauge of stocks across the globe gained 0.59 per cent, following a two-day losing streak.
The pan-European STOXX 600 index rose 0.77 per cent after four sessions of losses.
Benchmark 10-year U.S. Treasury yields rose off 15-month lows as markets steadied.
“This morning, starting in the overnight, you really had the first sign of stability in risk assets,” said John Briggs, head of strategy for the Americas at NatWest Markets in Stamford, Connecticut. “I think you’re just seeing a bit of a pullback in terms of the poor sentiment that dominated the past few days.”
Benchmark 10-year notes last fell 5/32 in price to yield 2.4336 per cent, from 2.418 per cent late on Monday. The yield fell as low as 2.377 per cent on Monday.
Germany’s 10-year bond yield remained near 2-1/2-year lows at below zero percent.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.11 per cent, with the euro down 0.22 per cent to $1.1286.
Gold retreated from the more than 3-week highs touched in the previous session.
Spot gold dropped 0.5 per cent to $1,315.60 an ounce.
Oil rose nearly 2 per cent on Tuesday as attention centered on geopolitical factors tightening supplies that are leading to falling exports from Venezuela and declining U.S. inventories.
Despite concerns about weaker demand due to an economic slowdown, oil prices have risen more than 25 per cent this year, supported by supply curbs by the Organization of the Petroleum Exporting Countries plus allies, and losses due to U.S. sanctions on Iran and Venezuela.
Venezuela’s main oil export port of Jose and its four crude upgraders have been unable to resume operations following a massive power blackout on Monday, the second in a month, according to industry workers and a union leader close to the facilities.
“There is no electricity, everything is paralyzed,” oil workers’ union leader Jose Bodas told Reuters on Tuesday.
The blackout earlier this month, due to years of underinvestment and lack of maintenance, also interrupted oil exports at Jose, the lifeblood of the OPEC nation’s economy, eroding total export volumes and causing delays in loading and discharging oil.
“We’re seeing increasing attention paid to what is going on in Venezuela and to the effect of sanctions,” said Gene McGillian, director of market research at Tradition Energy.
“Buyers are driving price higher due to expectations that tightening of waivers on U.S. sanctions on Iran will create a tighter fundamental picture,” he said.
Brent settled up 76 cents at $67.97 a barrel, not far below its 2019 high of $68.69 reached on March 21.
U.S. crude futures’ gains were sharper, rising $1.12, or 1.9 per cent, to $59.94 a barrel, ahead of weekly inventory data.