(Bloomberg) -- Central banks set the tone on global financial markets Wednesday, with the latest comments from policy officials sparking a risk-on mood that sent U.S. stocks to the biggest gain in two months and roiled currencies from the pound to the loonie.
The S&P 500 Index rebounded from the biggest selloff in six weeks, with bank shares rising to March highs Treasury 10-year note yields climbed above 2.21 percent. Technology firms snapped back to halt a selloff that dented confidence in the year’s biggest gainers. Small caps led the way with a rally that topped 1.5 percent and took the Russell 2000 Index within a point of an all-time high.
The mood in U.S. equities reversed shortly before the open, when European Central Bank officials said markets had misinterpreted as hawkish comments Tuesday from Mario Draghi. That sent the euro tumbling from the highest in a year versus the dollar on bets stimulus would remain robust in the region. The shared currency reversed again and the pound soared when Bank of England’s Mark Carney, in a sign of confidence in the U.K. economy, said rates may need to rise soon. Canada’s Stephen Poloz then reiterated he’s considering tightening, sending the loonie tearing higher.
The optimistic reading of the latest central bank proclamations -- economies around the globe can withstand tighter financial conditions as growth picks up -- changed the tone in financial markets less than a day after a host of events from an IMF cut to its U.S. growth forecast, a fresh blow to the Republican agenda in Washington and a global cyberattack had ushered in note of caution. A trio of Federal Reserve speakers had also suggested that some assets had gotten rich by conventional measures. Markets also got a boost Wednesday as oil’s rebound continued.
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Here’s what lies ahead for investors:
- China’s PMI might have declined in June after unexpectedly remaining unchanged in May, reflecting government offers to cut overcapacity and leverage. That reading is due Friday.
- Also slated this week: Japanese inflation, factory output, unemployment, household consumption and housing starts.
Here are the main moves in markets:
- The S&P 500 Index added 0.9 percent to 2,440.51 as of 4 p.m. in New York, bouncing back from a loss of 0.8 percent. It’s on pace for a quarterly gain of 3.3 percent, the seventh straight advance.
- Financial shares surged 1.6 percent, touching the highest since March.
- The Nasdaq Composite Index jumped 1.4 percent, while small caps in the Russell 2000 Index rallied 1.5 percent, the most since June 1.
- The Stoxx Europe 600 Index closed little changed as it heads for a monthly slide of about 1 percent.
- MSCI’s emerging markets index fell 0.3 percent, paring a quarterly gain of 5.8 percent.
- The Bloomberg Dollar Spot Index dropped 0.4 percent to the lowest since October.
- The euro rose 0.4 percent to $1.1385, the highest level since June 2016. The shared currency surged 1.4 percent on Tuesday.
- The pound jumped 0.9 percent to $1.2933 and the loonie surged 1.3 percent to 1.30293.
- The yield on 10-year Treasuries added one basis point to 2.21 percent after jumping seven basis points Tuesday.
- The yield on German bunds was little changed at 0.37 percent.
- WTI futures advanced 1.1 percent to settle at $44.74 after climbing 4 percent in the previous four sessions. Prices gained as government data showed a drop in U.S. gasoline supplies that have remained stubbornly high at the start of the summer driving season.
- Gold rose 0.3 percent to $1,251.35 an ounce, climbing for a second day.
- The MSCI Asia Pacific Index fell 0.3 percent as declines in technology shares overshadowed gains in banks and raw-materials companies. Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co. and Tencent Holdings Ltd. led the selloff with losses of at least 1.2 percent.
- The yuan continued to rise on speculation of central bank intervention, with the offshore currency up 0.2 percent after surging 0.6 percent Tuesday.