Global stocks climb, yields retreat from multi-decade highs

European stocks experienced a surge on Tuesday, further fueling a global equity rally as optimism increased ahead of earnings season. Simultaneously, pressure eased on longer-dated bonds and lower oil prices helped stabilize markets following last week's bond turmoil. The euro rose slightly against the US dollar, but concerns about the euro zone's fiscal health remained.

France's 10-year bond yield declined significantly, falling 9 basis points to 4.77% after reaching its highest level since the 2000s the previous week. This was attributed to French Prime Minister Pedro Sanchez's announcement of a snap election scheduled for the following month. Far-right candidate Marine Le Pen, leading the polls for the upcoming presidential election, stated her intention to reduce France's budget deficit to 3% by 2030.

The pan-European STOXX 600 index rose by 1%, marking its third consecutive day of gains. Technology-driven gains lifted the Nasdaq futures and S&P 500 futures, both adding approximately 0.2%. Third-quarter earnings season is set to commence next week, with Goldman Sachs projecting a 27% growth in S&P 500 earnings, with a significant portion stemming from companies benefiting from AI infrastructure investments.

Nvidia, the world's most valuable company and a key indicator of the AI sector, saw a 1% increase in premarket trading, positioning it for a market valuation of around US$5.8 trillion. Brent crude prices dipped slightly, falling 0.4% to US$99.91 a barrel, after declining 1.9% the previous day. This decline was primarily due to robust crude exports from the Middle East and the G7's release of emergency oil reserves, which alleviated supply concerns. However, the ongoing regional tensions limited the extent of losses.

While the bond selloff showed signs of calming, European sovereign bond yields remained near multi-year highs due to persistent inflation and debt concerns. The spread between French 10-year bond yields and German government debt narrowed to 129.79 basis points from last week's record-high spread. German 10-year bond yields decreased by 5 basis points to 3.44%. The premium investors demand for French 10-year bonds over safer German debt remained near multi-year peaks.

In the United States, long-dated Treasury yields eased after reaching fresh 24-year highs overnight. The 10-year yield dropped 3 basis points to 5.2815%, and the 30-year yield declined 2.8 basis points to 5.6356%. This downward trend occurred even as market expectations of a Federal Reserve rate increase this month diminished to 22% from 71% a week earlier, following a modest US jobs report and central bank calls for additional evidence before further tightening monetary policy.

The US dollar weakened against most major currencies, with the dollar index falling 0.16% to 101.99 after gaining 3.5% over the past month. Spot gold prices rose 0.3% to US$4,152.97 an ounce.