Wall Street stocks opened higher, while Treasury yields and the dollar pulled back on Friday, as risk appetite was boosted by data pointing to economic growth, even as expectations for rate hikes kept bond yields near multi-year highs.
In morning trading, the Dow Jones Industrial Average rose 0.22%, to 33,076.7, the S&P 500 gained 0.40%, to 3,997.22, and the Nasdaq Composite added 0.5%, to 11,520.06.
Stock markets gained in Asian trading, with investors optimistic about signs of a Chinese economic rebound. Activity in China’s services sector expanded at the fastest pace in six months in February, driving a solid increase in employment, a PMI survey showed.
The positive market sentiment continued during the European session, with Europe’s STOXX 600 up 0.74%.
The recovery in euro zone business activity gathered pace last month, PMI survey data showed, in the latest piece of data to suggest the bloc will avoid a recession.
But euro zone government bond yields were still near their highest in years after euro zone inflation data on Thursday drove market expectations for the European Central Bank’s (ECB) terminal rate to around 4%.
Estonian central bank chief Madis Müller made the case for further ECB rate hikes on Friday, while ECB Vice President Luis de Guindos warned of persistent inflation.
At 2.702%, the benchmark 10-year German yield was near its highest level since 2011 and on track for its biggest weekly rise since December.
U.S. Treasury yields paused their rally. The U.S. 10-year Treasury yield fell to 3.993%, down from Thursday’s high of 4.091%.
Investors are trying to gauge the path for Federal Reserve rate hikes, after strong U.S. data in recent weeks suggested rates may need to be higher for longer. Several Fed officials are set to speak later on Friday.
”We seem to be in a tug of war between the China reopening theme which basically means re-rating global growth expectations higher and the Fed re-pricing,” said Vasileios Gkionakis, European head of FX strategy at Citi.
Gkionakis said that although risk assets faced headwinds from tighter monetary policy, global demand is picking up.
The MSCI world equity index, which tracks shares in 47 countries, was up about 0.6% on the day, on track for a slightly positive week.
The euro was up 0.2% on the day, while the U.S. dollar was down 0.25% against a basket of currencies.
Analysts polled by Reuters were unfazed by the dollar’s recent strength, up about 7% over the last 12 months, and predicted a weaker greenback in a year amid an improving global economy and expectations the Fed will stop hiking interest rates well ahead of the ECB.
Oil prices dipped but were still set for a weekly gain. U.S. crude fell 1.73% to $76.81 per barrel and Brent was at $83.32, down 1.69% on the day.
Spot gold added 0.6% to $1,846.66 an ounce.
Cryptocurrencies suffered as the crisis engulfing crypto-focused bank Silvergate Capital Corp worsened. Bitcoin was down around 4.4% at around $22,429, its lowest since Feb. 15.
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