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US stocks rose along with Treasury yields as investors deemed the market reaction to Italy’s political turmoil overwrought.

The dollar slipped and oil rose.The S&P 500 Index headed for the first gain in four days as American 10-year yields pushed above 2.84%, boosting financial shares that had sold off on Tuesday as worries about Italy leaving the euro spread. The greenback declined the most in nearly three weeks. West Texas crude edged higher.

In Europe, Italy’s 10-year yield fell as much as 32 basis points as the country successfully passed a key test of appetite for its debt and rifts emerged between populist leaders. The euro rose the most since March, as German jobs data topped estimates and strong CPI readings across Europe added to the sentiment.

Traders are catching their breath after the unprecedented Italian bond slump spilled over into global risk assets. While the prospect of snap Italian elections -- which could effectively become a referendum on the euro -- continues to loom, some investors see the selloff as overdone while the timing of any vote remains unclear. Still, the concerns add to a growing list that includes the strength of the global economy, North Korea and simmering trade tensions.

“Ultimately we think Italy stays in the club,” said Gordon Brown, London-based co-head of global portfolios at Western Asset Management Co., which had made short bets on the debt of the euro region’s No. 3 economy last week but is now closing out positions.

“Yields will settle down at a more reasonable level, but one that reflects ongoing political risk premium,” Brown claimed.

Investors are also keeping an eye on the White House, with the Trump administration plowing ahead with plans for tariffs on Chinese goods and giving conflicting signals on talks with North Korea.

Elsewhere, oil rose after a string of declines in the wake of major producers’ plans to step up output. Saudi Arabia, Kuwait, and the UAE will meet in Kuwait City on Saturday to discuss supply. Financial shares led the MSCI Asia Pacific Index down as the region played catch up to the previous day’s selloff.

Stocks

  • The S&P 500 Index rose 0.6%, the Dow Jones Industrial average climbed 0.5%, while the Nasdaq Composite index was up 0.5% as of 10.30 AM (EST)
  • The Stoxx Europe 600 index increased 0.1%
  • The UK’s FTSE 100 index increased 0.2%
  • Germany’s DAX index advanced 0.7%, the biggest gain in more than a week
  • The MSCI Emerging Market Index sank 1.2% to the lowest in almost six months
  • The MSCI Asia Pacific Index dropped 1.4% to the lowest in almost 16 weeks on the biggest tumble in two months

Currencies

  • The Bloomberg Dollar Spot Index sank 0.4%, the largest decrease in almost three weeks
  • The euro climbed 0.7% to $1.1624, the biggest increase in more than four months
  • The British pound jumped 0.4% to $1.3297, the largest climb in more than six weeks
  • The Japanese yen dipped 0.1% to 108.84 per dollar
  • The Turkish lira jumped 1.9% to 4.4638 per dollar, the strongest in almost two weeks

Bonds

  • The yield on 10-year Treasuries jumped six basis points to 2.84%
  • Germany’s 10-year yield rose nine basis points to 0.35%, the largest surge in about 11 months
  • Britain’s 10-year yield gained five basis points to 1.197%, the biggest gain in more than a week
  • Italy’s 10-year yield sank 24 basis points to 2.922%, the largest tumble in almost six years

Commodities

  • West Texas Intermediate crude gained 0.7% to $67.20 a barrel, the first advance in more than a week
  • Gold increased 0.2% to $1,302.02 an ounce

Here are some key events to watch for this week:

  • EU trade chief Cecilia Malmstrom and US Commerce Secretary Wilbur Ross are scheduled to meet on Wednesday in an informal World Trade Organization ministerial in Paris
  • The US employment report for May is due Friday. It is the last one before the US Fed’s June meeting
  • Automakers report May US sales on Friday
  • Also on Friday, some onshore Chinese stocks join MSCI Inc’s global indexes
  • On Saturday, US Secretary of Commerce Wilbur Ross will travel to Beijing for more talks with Vice Premier Liu He on topics including ZTE Corp and trade

Source: Bloomberg

Last modified on Wednesday, 30 May 2018

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