Global stocks rebound on cyclical surge, gold edges higher
NEW YORK (Reuters) – Global equity markets rebounded on Tuesday, buoyed by a surge in cyclical stocks on Wall Street as investors bet the economic recovery would overcome a rollback of California’s reopening, while safe-haven gold prices solidified gains above $1,800 an ounce.
The euro rose versus the dollar on optimism about the possibility of a European Union stimulus package, but market participants remained cautious, leading U.S. and euro-zone government debt yields to fall.
A decline in U.S. consumer prices that showed core inflation remained well under the Federal Reserve’s target of 2% sent Treasury yields lower, as did concerns about the rollback of business reopenings in California announced Monday.
Europe’s broad FTSEurofirst 300 index closed down 0.79% and initially weighed on MSCI’s world equity index after a decline overnight in Asian equities. The global benchmark index, which tracks shares in 49 nations, rose 0.53% to 543.54, driven by a rebounding Wall Street.
Cyclicals outperformed as technology shares were slammed in Europe, where the tech subsector fell 2.6% in its biggest one-day sell-off in just over a month.
The Dow Jones Industrial Average rose 2.13%, the S&P 500 gained 1.34%, and the Nasdaq Composite added 0.94%, reversing early losses on declines in Amazon as Apple rose.
Technology and tech-related shares initially sold off and cyclicals rose, including financials, industrials and energy stocks.
“Every once in a while cyclicals will outperform. These are the most beaten-up securities in the market. But they’re not the safe trade, which is tech-plus. That’s where the growth is,” Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“But the cyclicals are extremely attractive from a valuation standpoint and an ultimate recovery standpoint. They have the most to gain back,” he said.
While the rollback of business reopenings may weigh on the economy, new coronavirus infections are hitting younger people and ultimately will not replicate earlier fatality rates, he said.
Oil rebounded. Brent crude settled up 18 cents at $42.90 a barrel. U.S. crude rose 19 cents to settle at $40.29 a barrel.
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