European, U.S. stocks stage tentative rebound

European, U.S. stocks stage tentative rebound

Economy31 minutes ago (Dec 06, 2021 11:01AM ET)

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(C) Reuters. FILE PHOTO: An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

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By Julien Ponthus

LONDON (Reuters) – European stocks opened higher on Monday while U.S. futures also traded in the black in a tentative rebound from last week when the spread of the COVID-19 Omicron variant and expectations of tighter U.S. monetary policy rocked global markets.

Optimism in Europe overcame ongoing stress on the tech sector and a rough session in Asia where the MSCI index of Asia-Pacific shares outside Japan lost 1%.

China’s central bank said it would cut the amount of cash banks must hold as reserves in an attempt to revive economic growth. The region has seen a series of corporate setbacks after ride-hailing giant Didi decided to withdraw from its New York listing last week.

Shares in China’s Evergrande plunged about 20% after the developer said there was no guarantee it would have enough funds to meet debt repayments.

Another giant Alibaba (NYSE:BABA) dropped more than 5% after announcing it would reorganise its e-commerce businesses while U.S. regulatory opposition to the sale of Softbank-owned chip firm Arm pushed the Japanese conglomerate 8% lower.

The mood was more upbeat moving West with the pan-European STOXX 600 up 0.7% and S&P 500 futures adding 0.4% while fears about the Omicron COVID variant receded somewhat.

Tech stocks however remained under pressure with Nasdaq futures down 0.2% and the sector losing 0.3% in Europe.

Speculation that the European Commission is set to propose stricter labour rules to regulate the gig economy have sent shares of companies in the sector sharply lower while inflation expectations dent the appeal of tech stocks.

“Higher yield environment erodes the value of future cash flows”, said Susannah Streeter, an analyst at Hargreaves Lansdown (LON:HRGV), commenting on the fall of the likes of Deliveroo in Europe.

Ten-year U.S. yields were rising back above 1.39% after losing almost 13 basis points last week.

November’s mixed U.S. jobs report did little to shake market expectations of more aggressive tightening by the Federal Reserve.

As uncertainty still runs high over the human and economic cost expected from the Omicron variant, investors are focusing on rising U.S. inflation which could prevent the Fed from coming to the rescue should market mayhem re-emerge.

“By severely limiting the FOMC’s ability to respond to downside risks posed by Omicron, inflation has effectively destroyed the Fed put,” Jefferies (NYSE:JEF) analysts said in note.

Inflation is “now the dominant driver of not only rates, but all risk assets”, they added as traders wait for Friday’s U.S. consumer price report.

The U.S. dollar index was flat after hitting brief 13-month peaks against the Australian and New Zealand dollars which both later rebounded.

The euro eased 0.13% to $1.1295, still well above its recent trough at $1.1184.

Bitcoin was down 1.7% and was last at $48,574. It hit a low of $41,967 over the weekend as profit-taking and macro-economic concerns prompted nearly $1 billion worth of selling across cryptocurrencies.

Oil prices rose close to $2 a barrel after top exporter Saudi Arabia raised prices for its crude sold to Asia and the United States, and as indirect U.S.-Iran talks on reviving a nuclear deal appeared to hit an impasse.[O/R]

Brent climbed $1.96 to $71.84 a barrel, while U.S. crude added $1.95 to $68.23 per barrel.

Gold prices edged 0.27% lower, pressured by the resilient dollar.

European, U.S. stocks stage tentative rebound

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