Global equities creep to five-week highs

World stocks climbed to five-week highs on Wednesday as investors ignored a broadening selloff in global bond markets fuelled by a combination of soaring inflation and hawkish comments from US policymakers.

Two-year US Treasury yields are up 70 bps so far in March and set for their biggest monthly jump since 2004. But investors have been relatively sanguine about the implications of higher yields on stock market valuations, with many choosing to buy back in after a bruising few months for equity prices.

MSCI’s broadest gauge of world stocks (.MIWO00000PUS) rose 0.2 per cent to a Feb. 17 high, a level last seen days before Russia invaded Ukraine. An Asian gauge (.MIAPJ0000PUS) rose 0.7 per cent to its highest since early March.

European stocks also gained, with a pan-European equity benchmark (.STOXX) hitting a new 1-month high in early London trading before they fell back as traders took profits.

US stock futures signalled some weakness on Wall Street when it opens.

“It is almost as if the negative impacts of inflation, rising interest rates and the uncertainties of war are no longer of concern,” said Stuart Cole, head macro economist at Equiti Capital, who added that investors were focusing on stocks that could withstand the high inflationary environment.

Technology shares, which have had an inverse correlation with higher interest rates in the past, were the biggest drivers of broader market gains, with a Hong Kong gauge of technology stocks (.HSTECH) rising to a three-week high.

In Asia, battered e-commerce giant Alibaba (9988.HK), which recently expanded a buyback programme, rose 6.7 per cent and in Tokyo out-of-favour tech investment firm SoftBank Group (9984.T) rose 7.2 per cent to its highest since February 10.

The main US tech index (.NDX) ended up 2 per cent overnight, cutting its year-to-date losses to 10 per cent from 20 per cent earlier this month.

Some previously solidly bullish investors, however, are worried about the impact of rising interest rates on the outlook for stocks. “Although there is widespread criticism, it’s too early to take the view that the Fed won’t be able to negotiate the fine line of reducing inflation without derailing growth,” said Mark Haefele, Chief Investment Officer, UBS Global Wealth Management.