European stocks rose on Monday while US government debt remained under pressure as investors weighed developments in Ukraine against the prospect of central banks tightening monetary policy to curb inflation.
The regional Stoxx Europe 600 stock index, which is down nearly 6 percent for the year but has erased losses suffered since Russia invaded Ukraine in late February, added 0.4 percent. Germany’s Dax gauge traded flat and London’s FTSE 100 rose 0.2 percent.
Futures contracts tracking Wall Street’s benchmark S&P 500 index rose 0.1 percent, while those tracking the tech-heavy Nasdaq 100 index added 0.3 percent.
“We have to be humble and say that the range of possible outcomes, given the war and the inflation outlook, is quite wide,” said Kasper Elmgreen, head of equities at Amundi. “Euro zone growth is falling, but a recession is not obvious because consumer and corporate balance sheets are quite strong.”
The Treasury yield curve is now at its most inverted level since 2007, when measured by the difference in two-year and 10-year borrowing costs. US government bonds posted their worst quarter on record in the first three months of this year, as traders expected a series of rapid interest rate hikes from the Federal Reserve.
The yield on the two-year Treasury note, which moves in the opposite direction of its price, rose 0.02 percentage point to 2.45 percent on Monday. This yield, which is sensitive to changes in interest rates, moved above the 10-year yield last week. for the first time since 2019. The yield on the 10-year note, a benchmark for borrowing costs around the world that moves with inflation and growth expectations, added 0.03 percentage point to 2.41 percent.
The inversion of this closely watched part of the yield curve is often perceived as a sign of an impending recession. However, economists and policymakers are undecided about whether the Fed’s huge pandemic-era bond-buying scheme may have distorted the bond market, skewing yields.
Aneta Markowska, chief financial economist at Jefferies, said there was “little evidence that we are in a late-cycle economy” as recessions tend to coincide with periods of “corporate restructuring, triggered by significant margin compression.”
“Margins have only started to contract and are still near cycle highs,” he added. “This doesn’t look like a corporate sector about to embark on a cost-cutting drive.”
In Hong Kong, shares rose sharply after regulators in China relaxed restrictions that had prevented US authorities from accessing audits.
The Hang Seng Tech Index closed 5.4 percent higher, with video platform Bilibili and electric vehicle maker Li Auto among the biggest gainers, gaining 13.3 percent and 10.2 percent higher. , respectively.
The share price surge came after the China Securities Regulatory Commission, Beijing’s top financial watchdog, said saturday would change confidentiality laws that prevent its foreign-listed companies from providing sensitive financial information to foreign regulators.
The US Securities and Exchange Commission said last month that China’s largest companies had three years to provide detailed audit documents or face delisting, accelerating a sell-off in US- and Hong Kong-listed Chinese tech shares.
Saturday’s announcement was expected to create a framework for US regulators to gain access to companies’ audit files.
Tech gains helped the Hang Seng Index rise 2.1 percent on Monday. Markets in mainland China were closed for a holiday. Japan’s Topix rose 0.5 percent.
Oil prices rose after last week’s declines, with Brent crude, the international benchmark, rising 0.3 percent to $104.66 a barrel.