Indrabati LahiriEuropean and UK stocks rallied Wednesday, rebounding from Tuesday’s sharp sell-off that was driven by renewed fears of inflation amid rising energy prices.
The Euro Stoxx 50 index gained more than 1% and Britain’s FTSE 100 advanced the most in a week as Brent crude oil prices pulled back from a three-year peak and global bond yields retreated from recent highs, tempering market concerns over price pressures. Stocks also drew support from declines earlier in the week. Those losses provided some investors with a chance to re-build positions at lower levels.
The best-performing sectors for the day across the UK and European markets were aerospace, energy and clothing, with Safran, BP and Next respectively leading their industries. Chemicals, technology and real estate lagged, following Tuesday’s rout in technology stocks and recent losses in Asian real-estate shares.
All eyes are on central bankers
Investors are now focusing on the European Central Bank Forum on Central Banking, a two-day summit of policy makers that started Tuesday. ECB President Christine Lagarde, US Federal Reserve Chairman Jerome Powell, Bank of England Governor Andrew Bailey and Bank of Japan Governor Haruhiko Kuroda will participate in a policy panel that starts at 16:45 BST (UTC +1).
Concerns that faster inflation could push major central banks to scale back monetary stimulus policies, which have been supporting financial markets by unleashing a flood of liquidity, continue to linger. Investors will be closely watching the ECB forum today for any central bank comments that may shed more light on the matter.
Market highlights
- The Euro Stoxx 50 index was up by about 1.1% around midday in London, while Germany’s DAX 40 was 1% higher on the day.
- In the UK, the FTSE 100 climbed 0.9%, on track for the biggest gain since 22 September.
- S&P futures gained 0.5%, suggesting a positive tone for the US market open.
- A pullback in the CBOE Volatility Index, or VIX, also suggested that investor sentiment is stabilising. The gauge of expected fluctuations in US equities, was around 22 on Wednesday, extending its pullback from a four-month high of almost 29 reached last week
- Brent crude was trading at around $77.8 per barrel, off Tuesday’s high above $80
- US 10-year Treasury yields were at 1.51%, down from a three-month high of 1.56% reached earlier in the day
