© Reuters. A general view shows the German share price index DAX board during afternoon trading as markets react on the coronavirus disease (COVID-19) at the stock exchange in Frankfurt, Germany, March 25, 2020. REUTERS/Ralph Orlowski/Files
By Herbert Lash and Danilo Masoni
NEW YORK/MILAN (Reuters) -A gauge of global equity markets edged higher on Tuesday while 10-year U.S. Treasury yields eased back from the 3% level as investors remained cautious, expecting the Federal Reserve to hike rates by the most in a single day since 2000.
In a sign of the challenge the Fed faces in fighting inflation, data showed U.S. job openings hit a record in March as worker shortages persisted, suggesting employers may need to raise wages.
Investors expect the Fed hike rates by half a percentage point on Wednesday, and to detail plans to reduce its $8.9 trillion balance sheet. The U.S. central bank raised its policy interest rate by 25 basis points in March.
Major stock indices in Europe rose, as did Wall Street’s big equity benchmarks.
MSCI’s all-country world index rose 0.4% and the pan-European STOXX 600 index closed up 0.53% after surviving a “flash crash” in Nordic markets on Monday caused by a Citigroup (NYSE:C) sell order trade.
The Dow Jones Industrial Average rose 0.17%, the S&P 500 gained 0.48% and the Nasdaq Composite added 0.16%.
“We could get a dead-cat bounce after the Fed meeting if it’s not more hawkish than what the market has been fearing,” said Jimmy Chang, chief investment officer at the Rockefeller Global Family Office, adding investor anxiety was running high.
“Potentially there could be a near-term rebound, but I do think the broader trend is still very cautious on the equity side.”
Nine of the S&P 500’s sectors rose, led by a 2.65% gain in energy, while oil and gas jumped 4.1% in Europe to lead markets there.
Overnight in Asia, Australia’s central bank raised its key rate by a bigger-than-expected 25 basis points, lifting the Aussie dollar as much as 1.3% and hitting local shares.
The Bank of England is expected to raise rates on Thursday for the fourth time in a row.
Asian equities were mostly steady in holiday-thinned trade, with both Chinese and Japanese markets shut. But in Hong Kong, Alibaba (NYSE:BABA) shares fell as much as 9% on worries over the status of its billionaire founder Jack Ma.
A state media report that Chinese authorities took action against a person surnamed Ma hit the stock hard, but it recouped losses after the report was revised to make clear it was not the company’s founder.
Germany’s benchmark 10-year Bund yield rose to 1% for the first time since 2015, before retreating as caution set in ahead of the anticipated U.S. and UK rate hikes this week. The yield on 10-year Treasury notes was down 4.2 basis points to 2.954%.
The benchmark note’s yield slid from 3% after breaching the key milestone for the first time since December 2018 on Monday.
The dollar fell against a basket of major currencies as investors weighed how much of the Fed’s expected move to hike rates this week and beyond was already priced in.
The dollar, which has been supported by safe haven buying on worries over the economic outlook, stayed just below the nearly two-decade high reached in April and the euro steadied above the lowest level in more five than years hit last month.
The dollar index fell 0.097%, while the euro up 0.17% to $1.0522. The Japanese yen strengthened 0.01% to 130.15 per dollar.
Elsewhere in currency markets, the Australian dollar jumped after the central bank raised its cash rate by a surprisingly large 25 basis points to 0.35%, the first hike in more than a decade. It also flagged more rate hikes to come as it pulls down the curtain on massive pandemic-related stimulus.
The Aussie was up 0.9% at $0.712 as a majority of analysts in a Reuters poll had expected a rise to only 0.25%.
Oil slipped as concerns about demand due to China’s prolonged COVID lockdowns outweighed support from a possible European oil embargo on Russia over the war in Ukraine.
U.S. crude futures settled down $2.76 at $102.41 a barrel, while Brent fell $2.61 to settle at $104.97 a barrel.
Copper and aluminium prices fell sharply as weak manufacturing data on Monday, COVID-19 outbreaks in China and rising rates stoked fears that demand for metals will soften.
Benchmark copper on the London Metal Exchange (LME)slid 3.4% at $9,435 a tonne in late trade, while LME aluminium fell 4.2% at $2,925.50 a tonne.
Gold firmed, tracking a slight retreat in Treasury yields and the dollar, while investors eyed an aggressive rate hike by the Fed on Wednesday.
U.S. gold futures settled up 0.4% at $1,870.60 per ounce.
Bitcoin fell 2.2% to $37,672.12.