European equities are opening broadly higher as calmer long-end bond yields and falling oil prices offset the Federal Reserve's hawkish rate hike. The DAX, FTSE 100 and other regional benchmarks extend yesterday's relief move, while US futures point higher ahead of the Wall Street open.
Europe's major indices are extending yesterday's relief rally this morning. The Eurostoxx trades 0.7% higher, while Germany's DAX is up 0.8%, France's CAC 40 gains 0.5% and the UK's FTSE rises 0.9%. Spain's IBEX and Italy's FTSE MIB each add 0.7%.
Bond yields hold steady after the Fed
The main driver is the reaction in the long end of the bond market after the Fed raised rates by 25 basis points to 3.75%-4.00% and kept a hawkish message. Yet 10-year Treasury yields have stayed around the 5% mark rather than breaking sharply higher. Heading into the decision, one of the biggest risks was that another hawkish signal would accelerate the global bond selloff. Instead, long-term yields are stabilising for now, giving stocks room for a relief bounce.
Falling oil adds to the risk-on mood
The latest drop in oil prices is also supporting sentiment. That follows Saudi Arabia offering additional crude cargoes through Oman, easing some immediate fears over Middle East supply disruption. Brent crude is down nearly 2% to close to $104, while WTI crude has fallen more than 1% to back under $101. The combination is particularly supportive for rate- and energy-sensitive parts of the market. Banks, industrials and other cyclicals had already started recovering yesterday, with Siemens Energy, RWE and Hochtief among the stronger DAX names.
US futures point higher too
US futures are also pointing modestly higher after Wall Street initially struggled with the Fed's hawkish message. S&P 500 futures are up 0.8% and Nasdaq futures gain 0.9%, adding to the more constructive tone in Europe this morning.
The market looks more risk-on, but this still has the makings of a relief rally rather than an all-clear. The Fed has made clear further tightening remains on the table, so another move higher in Treasury yields could quickly test the rebound.
Source: Investinglive
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