Bond Yields Stabilize, Equities Rebound, Recession Fears Recede

Global equities rebound from Monday’s stock rout as recession fear wanes and bond rates rise.
Thomas Hughes
Wall street direction sign, New York vintage process

Stabilizing Bond Yields Lift U.S. Equities

The U.S. futures were indicating a modestly higher open on Tuesday morning. The move comes a day after global stocks fell sharply on mounting recession fears. The cause of fear, an inversion of the 3-month bill and 10-year note yield, is seen as an indication of recession. The reason for today’s rise in stock prices is due to a rebound in the 10-year yield. The 10-year yield hit a 10-year on Monday morning but rebound sharply in early Tuesday action. The tech-heavy NASDAQ Composite led indices higher with a gain near 0.60% but the blue-chip Dow Jones Industrial and broad-market S+&P 500 were close behind.

In stock news, shares of Bed, Bath & Beyond jumped more than 20% in early pre-opening trading. The company says activists investors are trying to replace the entire board of directors and investors cheered. In economic news, Housing Starts came in below expectations. Housing starts came in at 1.62 million annualized homes, down from the previous 1.28 million and shy of estimates. Building permits, an indication of future housing starts, fell -1.6% versus the expected -1.3%. The miss is due in large part to weakness in single-family home starts. Despite the weak data economists are expecting a moderately strong rebound in housing this year.

European Equities Rebound As Recession Fears Fade

Stabilizing bond yields in the U.S. helped lift equities in the EU. The stabilized yield helped to alleviate some, but not all, fear of future recession. The French CAC led the indices with a gain near 0.80% while the German DAX and UK FTSE 100 both advanced about 0.30%

Shares of Ocado were among today’s leaders. The online home-delivery supermarket has inked an e-commerce deal with Australia’s Coles Supermarkets. Shares of Convatec were also among today’s leaders in the EU. The international medical technologies company says private equity firm EGT has shown interest and shares rose more than 8.0%.

Volatile Asia Wildly Mixed As Recession Fears Fade

Asia indices were mixed and volatile as the Japanese Nikkei posts a gain of 2.15% and the Chinese Shanghai Composite falls -1.50%. In Japan, shares of heavyweights Fanuc and Nintendo both made big gains, 1.70% and 4.76% respectively, following Monday’s big drop. Elsewhere in the region, markets were less volatile with the Hong Kong Hang Seng, Australian ASX, and Korean Kospi all posting small advances, less than 0.20%. Korea’s Samsung was the biggest single loser in the region after warning 1st quarter profits may miss analysts consensus.

Investors in the region are keeping their eyes on trade developments. News out two weeks ago raised the specter of fear the U.S./China negotiation would fall apart. U.S. Secretary of the Treasury Steve Mnuchin and Trade Ambassador Robert Lighthizer are expected in Beijing this week for another round of high-level talks. If the talks proceed well we may see a deal signed by Trump and Xi sometime in mid-April.

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