Global stocks rebounded on Tuesday, with a retreat in bond yields and dovish signals from Federal Reserve officials providing support. However, the conflict in the Middle East added to market nervousness.
Market Highlights:
The MSCI All-World index rose for a fifth consecutive day, gaining 0.5%, after hitting five-month lows last week. Europe’s STOXX 600 surged by 1.4%.
E-mini futures for the S&P 500 index” data-wpil-keyword-link=”linked”>S&P 500 index showed gains of 0.1-0.2%, and Treasuries experienced a powerful rally.
The oil market, which surged over 4% on Monday, retreated slightly.
The Israeli-Palestinian conflict continued to be closely monitored, with the situation evolving rapidly.
Geopolitical Tensions Impacting Markets:
Geopolitical tensions create uncertainty for markets due to a wide range of possible outcomes. As a result, markets often respond with caution until there is a clearer direction.
Israeli markets and companies exposed to Israel have been negatively affected. The Israeli shekel declined, and the cost of insuring against sovereign default rose.
The Fed and Yields:
Government bonds have experienced a recent sell-off, leading to higher yields. However, comments from senior Federal Reserve officials suggested that rising Treasury yields could deter the central bank from further rate increases.
The yield on 10-year U.S. Treasuries, which had reached its highest level since the financial crisis, declined sharply from recent peaks.
The dollar remained steady after a spike on Monday.