U.S. Stocks Climb as Treasury Rally Takes Breather: Markets Wrap

(Bloomberg) --

U.S. stocks rallied and Treasuries fell as investor concern over an economic downturn showed signs of easing. The dollar rose.

Energy shares led gains in the S&P 500 Index as oil surged after Russia signaled commitment to output cuts. The yield on benchmark U.S. bonds increased after a two-day plunge, though the spread between three-month and 10-year rates remained in negative territory. The greenback erased its monthly drop, and the Japanese yen led losses in haven currencies. Gold slid.

Risk assets rebounded on speculation that the recent sell-off in global markets had been overdone. Goldman Sachs Group Inc. added its voice to those advising against panic over the inversion of the U.S. yield curve -- which has served as a recession warning. While the economic backdrop indeed may be less favorable, stocks may end up doing well with a flat curve, the analysts wrote.

“The market has run quite far in a short period without much economic news supporting it,” wrote Christopher Low, the chief economist at FTN Financial. “As a result, we are not surprised to see higher yields today. A breather makes sense, and rates could back up further before the rally resumes.”

Every industry in the S&P 500 rose, while the Stoxx Europe 600 had its first gain in a week. Japan’s Topix Index jumped more than 2.5 percent -- a day after its biggest slide this year. Emerging-market stocks also advanced.

“What you’re seeing is some oversold conditions, and some buying opportunities are starting to appear in the marketplace,” said Chris Larkin, senior vice-president of trading at E*Trade.

The outcome of U.S.-China trade talks and any developments in Britain’s tortuous exit of the European Union could help determine sentiment from here. The pound climbed as a Brexit hardliner indicated he’s willing to back Theresa May’s deal, a move that could be a game-changer if others follow suit.

Here are some key events coming up:

• U.S.-China trade talks resume, with a cabinet-level American delegation due in China.
• U.K. Parliament is set to stage several key votes on Brexit on Wednesday.
• Fed Governor Randal Quarles will speak Friday to the Shadow Open Market Committee on “Strategic Approaches to the Fed’s Balance Sheet and Communications.”

These are the main moves in markets:

Stocks

• The S&P 500 gained 0.7 percent to 2,818.46 at 4 p.m. in New York.
• The Stoxx Europe 600 increased 0.8 percent.
• The MSCI Asia Pacific Index jumped 1 percent.
• The MSCI Emerging Market Index gained 0.3 percent.

Currencies

• The Bloomberg Dollar Spot Index added 0.2 percent.
• The euro fell 0.4 percent to $1.1268.
• The Japanese yen slid 0.5 percent to 110.57 per dollar.
• The British pound rose 0.1 percent to $1.3205.

Bonds

• The yield on 10-year Treasuries climbed two basis points to 2.42 percent.
• Germany’s 10-year yield increased one basis point to -0.02 percent.
• Britain’s 10-year yield rose two basis points to 1.007 percent.

Commodities

• The Bloomberg Commodity Index advanced 0.1 percent.
• West Texas Intermediate crude surged 1.9 percent to $59.94 a barrel.
• Gold dipped 0.6 percent to $1,321.40 an ounce.

--With assistance from Lilian Karunungan, Abhishek Vishnoi, Andreea Papuc, Joanna Ossinger, Eddie van der Walt and Samuel Potter.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth

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