European shares saw a rebound after a five-day decline as bond yields recovered and concerns about rising interest rates subsided. Technology and energy companies led the Stoxx 600 higher. US equity futures also rose, suggesting that stocks may be entering oversold territory. Meanwhile, yields on Treasuries and German government bonds slipped from decade highs. The direction of the bond market is crucial in guiding the trajectory of stocks, currencies, and ultimately the economy.
The bond market’s behaviour is of significant importance as it impacts not only stocks but also consumer sentiment and spending. Derek Halpenny, head of global markets research at MUFG Bank Ltd., believes that if yields continue to rise, equity markets could experience even larger declines, which could in turn negatively affect consumer spending and expectations. Oil prices resumed their climb, reaching over $91 a barrel. However, US consumer confidence has been affected by increased costs at the fuel pump and the broader impact of aggressive rate hikes.
In other news, Senate Democratic and Republican leaders agreed on a plan to keep the government open and provide $6 billion in assistance to Ukraine. However, the plan still needs to overcome gridlock in the House to avoid a shutdown on October 1. Looking ahead, key events this week include US durable goods data, Eurozone economic and consumer confidence figures, US jobless claims and GDP data, as well as speeches by Fed Chair Jerome Powell and ECB President Christine Lagarde.