US and European equities rose on Monday after suffering their biggest declines in two months on Friday.
The blue-chip S&P 500 and the tech-heavy Nasdaq both gained 1.1 percent in early trading.
In Europe, the region-wide Stoxx 600 rose 1.25 percent. Germany’s Dax rose 1.5 percent, while France’s Cac 40 rose 1.7 percent. London’s FTSE 100 rose 0.7 percent.
“I suspect after a week of consolidation there will be some dip-buying,” said Emmanuel Cau, head of European equity strategy at Barclays.
The euro rose 0.5 percent, and the dollar index, which measures the greenback against a basket of six peer currencies, fell 0.4 percent. Sterling rose 0.8 percent as Britain and the EU reached a deal on post-Brexit trade rules.
Investors continue to pore over economic data releases, which so far have shown the economy is overheating, spurring major central banks like the Federal Reserve and the European Central Bank to raise interest rates further.
US durable goods orders, excluding transportation, rose 0.7 percent month-on-month, beating expectations of 0.2 percent.
EU economic sentiment, published on Monday, was lower than expected, at 99.7, relative to the consensus forecast of 102.5. Consumer confidence was in line with expectations, at minus 19.
US ISM manufacturing and European flash consumer price index figures will be released this week.
This month has proved an uncertain time for traders, as the persistent threat of inflation has forced them to price in higher central bank interest rates. On Monday, market watchers will hear extra insight into banks’ thinking in speeches from Fed board member Philip Jefferson, as well as ECB executive board member Philip Lane.
“We had a sell-off last week, so it is not unusual to see bounces of this magnitude as the market tries to understand the data we have seen so far,” said Neil Shearing, chief economist group at Capital Economics. “I suspect that the ECB has been quite clear that there is more work to be done, but for the Federal Reserve the main question is how much rates should be raised, and how long they will stay there.”
Markets last week reacted quickly to better-than-expected economic data, after core monthly personal consumption expenditures – the Fed’s preferred measure of inflation – rose above expectations in January. Prices increased by 0.6 percent month on month and 4.7 percent year on year – the latter should be more than the average forecast of 4.3 percent up.
The 10-year U.S. Treasury yield fell 0.03 percentage points to 3.91 percent, while the two-year contract, which is more sensitive to monetary policy, fell 0.01 percent to 4.8 percent. “January was the best January for the Global Bond Aggregate index this century, while February so far will be the worst February over the same period,” analysts at Deutsche Bank said.
The yield on German Bunds 10 years rose 0.05 at 2.58 percent.
Hong Kong’s Hang Seng index fell 0.3 percent while China’s CSI 300 lost 0.4 percent.
Brent crude fell 1.3 percent to $82.10, while WTI, the U.S. benchmark, fell 1.3 percent to $75.32
.