(Bloomberg) — European stocks advanced alongside US stock futures after the S&P 500 closed higher for the first time in four sessions, providing a moment of respite in one of the worst years for stocks and bonds in more than a decade.
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The Stoxx Europe 600 Index rebounded 0.5% from its lowest level since Nov. 9 after global bond yields surged on the Bank of Japan’s unexpected increase in its yield trading band. Contracts on the S&P 500 added 0.3%.
Ten-year Treasury yields steadied after surging 20 basis points this week. The BOJ announced a bond buying operation Wednesday as the yield on 10-year debt approached the new upper limit, while the nation’s two-year yields rose above zero for the first time since 2015.
The yen trimmed a fraction of its gains after the biggest one-day jump since 1998 on Tuesday.
Many economists now expect the BOJ to raise interest rates, the latest to join a campaign of hawkish policy that’s proved toxic to balanced investing strategies this year.
With inflation resisting aggressive central bank action to curb it, price pressures hit both bonds and equities together, unhinging their ability to counterbalance each other.
The time-honored method of allocating 60% to equities and 40% to fixed income has plunged 17% in 2022, the worst performance since 2008.
For Japanese investors, at least, the latest policy move may change their investment calculus for the better. With the yields they can earn on bonds at home suddenly more attractive, they may look to repatriate money held in overseas stocks and bonds. Japanese investors have more than $3 trillion in foreign equities and debt with roughly half in the US, according to data compiled by Bloomberg.
Read more: Global Era of Negative Yields Is Ending as Japan Note Tops Zero
Elsewhere in markets, oil held a two-day gain as a report showing a drop in US stockpiles and threats to supply countered concerns about a slowdown.
Key events this week:
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US GDP, initial jobless claims, US Conf. Board leading index, Thursday
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US consumer income, new home sales, US durable goods, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.5% as of 8:34 a.m. London time
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S&P 500 futures rose 0.3%
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Nasdaq 100 futures rose 0.3%
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Futures on the Dow Jones Industrial Average rose 0.4%
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The MSCI Asia Pacific Index fell 0.1%
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The MSCI Emerging Markets Index was little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0620
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The Japanese yen was little changed at 131.81 per dollar
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The offshore yuan fell 0.2% to 6.9763 per dollar
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The British pound fell 0.3% to $1.2145
Cryptocurrencies
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Bitcoin fell 0.4% to $16,809.19
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Ether fell 0.6% to $1,208.39
Bonds
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The yield on 10-year Treasuries was little changed at 3.69%
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Germany’s 10-year yield was little changed at 2.30%
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Britain’s 10-year yield advanced one basis point to 3.61%
Commodities
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Brent crude fell 0.1% to $79.90 a barrel
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Spot gold fell 0.2% to $1,814.79 an ounce
This story was produced with the assistance of Bloomberg Automation.
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