Stock markets rose on Tuesday as calm returned from last week’s defeat, but analysts warned recession fears have not gone away and will cause more turmoil.
After a three-day holiday weekend, Wall Street erupted higher, with major indices closing more than 2 percent higher after spending the entire session in positive territory.
European stocks rose for a second straight day but pared some of their morning gains.
Oil prices extended gains on hopes of improving energy demand from key consumers China and the United States, while the euro rose on the prospect of rising borrowing costs in the euro zone.
“Risk appetite has rallied for now, perhaps because we’re getting a much-needed break from central bank decisions this week,” IG analyst Chris Beauchamp told AFP.
“But while a recovery is overdue, it is likely only temporary.”
A general sense of gloom remains as traders speculate that soaring borrowing costs around the world will plunge economies into recession.
The focus this week is on Federal Reserve Chairman Jerome Powell’s two-day testimony before lawmakers in Washington, who are being watched closely for clues regarding the bank’s plans to combat rising consumer numbers.
“Where we go from here will depend largely on whether Federal Reserve Chair Powell scares markets with his pre-release comments and what tomorrow’s (Wednesday) UK inflation data shows,” said City Index analyst Fiona Cincotta told AFP.
The Fed announced a sharp hike in interest rates last week, days after inflation data beat forecasts and returned to four-decade highs.
Several officials – including those at the Fed, Bank of England, Reserve Bank of Australia and the European Central Bank – have spoken out in recent days to suggest further tightening in borrowing costs.
Global inflation has risen to multi-decade highs due to a variety of factors, including global supply shortages and the Ukraine conflict, which has fueled soaring food and energy prices.
“These small rallies in stock markets should not offer any consolation,” said Craig Erlam, senior analyst at trading platform OANDA.
“Recession is increasingly becoming the baseline scenario and as such equities are vulnerable to further losses,” he said.
On currencies, the yen hit a fresh 24-year low against the US dollar after Prime Minister Fumio Kishida commented that it is “up to the central bank” how to maintain its easy money policy while central banks elsewhere are raising interest rates .
“The market is clearly trying to test the Bank of Japan’s resolve on how willing it is to tolerate further currency weakness,” said CMC Markets UK analyst Michael Hewson.
In corporate news, shares of German chemicals group Bayer fell 4.7 percent after the US Supreme Court refused to hear an appeal from Bayer’s Monsanto to quash lawsuits alleging its weed killer Roundup causes cancer , before reclaiming part of the drop.
The decision marks a serious blow to the German company’s legal battle against Roundup-related cases, and Bayer has committed more than $15 billion to deal with a spate of US lawsuits related to the weed killer.
– Key figures at 1530 GMT –
New York – Dow: up 2.2 percent at 30,530.25 (close)
New York – S&P 500: up 2.5 percent at 3,764.79 (close)
New York – Nasdaq: up 2.5 percent at 11,069.30 (close)
London – FTSE 100: up 0.4 percent at 7,152.05 (close)
Frankfurt – DAX: Plus 0.2 percent at 13,292.40 (close)
Paris – CAC 40: up 0.8 percent at 5,964.66 (close)
EURO STOXX 50: up 0.7 percent at 3,494.00 (closing price)
Tokyo – Nikkei 225: up 1.8 percent at 26,246.31 (close)
Hong Kong – Hang Seng Index: up 1.9 percent to 21,559.59 (close)
Shanghai – Composite: down 0.3 percent at 3,306.72 (close)
Euro/dollar: rise to $1.0535 from $1.0511 late Monday
Pound/dollar: rise to $1.2273 from $1.2253
Euro/Pound: UP at 85.80p from 85.78p
Dollar/yen: up at 136.64 yen from 135.07 yen
North Sea Brent Crude: up 0.5 percent to $114.65 a barrel
West Texas Intermediate: up 1.0 percent to $110.65 a barrel
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