Global stocks rebound from sell-off; Treasury yields, dollar higher

By Sinéad Carew and Amanda Cooper

NEW YORK/ LONDON (Reuters) – Equities around the world were attempting a comeback on Tuesday after the previous day’s aggressive selloff while Treasury yields rose and the dollar was slightly higher as central banker comments countered recession fears.

Oil prices were volatile, with a weak outlook for demand partly offset by price support stemming from the risks of an escalation in the Middle East conflict as well as from a drop in Libyan production.

But the Nikkei’s roughly 10% rebound in Tokyo brought some relief after the index’s 12.4% drop on Monday – its biggest daily sell-off since the 1987 Black Monday crash.

U.S. Federal Reserve policymakers pushed back on Monday against the notion that weaker-than-expected July jobs data means that the economy is in a recessionary freefall.

Late on Monday San Francisco Fed President Mary Daly said the jobs report leaves “a little more room for confidence that we’re slowing but not falling off a cliff”. But she said it was “extremely important” to keep the jobs market from falling over.

The S&P 500 had lost 3% on Monday, while the Nasdaq slumped 3.43%, extending a recent sell-off as fears of a possible U.S. recession spooked global markets.

We’re just getting a little bounce after the sell-off of the last few days, We’re seeing a risk-on bounce,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut, noting that investors were adjusting valuations to prepare in case of a recession..

“You had people panicking yesterday, worried about a recession. We’re having a slowdown but that was the intention of the rate hikes,” said O’Rourke.

“You want to make sure it doesn’t turn into a recession, that we’re not slowing too quickly. But thus far the economic data this year is not recessionary.”

On Wall Street at 11:12 a.m. the Dow Jones Industrial Average rose 399.02 points, or 1.03%, to 39,102.29, the S&P 500 gained 73.47 points, or 1.42%, to 5,259.80 and the Nasdaq Composite gained 228.07 points, or 1.41%, to 16,428.15.

MSCI’s gauge of stocks across the globe rose 11.04 points, or 1.45%, to 773.12 after falling more than 3% on Monday, which was its third straight session of declines.

Europe’s STOXX 600 index rose 0.46% in a volatile session with a dip of around 0.5% at its lowest point.

The dollar recovered a little against most major peers and the Japanese yen steadied around 7-month highs against the U.S. currency as some of the more striking moves of recent days reversed somewhat, and a semblance of calm returned to markets.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.06% to 102.93.

Against the Japanese yen, the dollar strengthened 0.37% to 144.7 while the euro was down 0.2% at $1.093.

U.S. Treasury yields rose as fears that the U.S. economy is quickly entering a recession were seen as overdone, while safe haven demand for U.S. bonds also ebbed as stocks recovered.

The yield on benchmark U.S. 10-year notes rose 7.5 basis points to 3.858%, from 3.783% late on Monday while the 30-year bond yield rose 6.9 basis points to 4.14%.

The 2-year note yield, which typically moves in step with interest rate expectations, rose 9.8 basis points to 3.9833%, from 3.885% late on Monday.

Oil prices were volatile with U.S. crude up 0.48% at $73.29 a barrel while Brent rose to $76.5 per barrel, up 0.26% on the day.

In precious metals, gold prices fell as the dollar firmed, although expectations of a U.S. rate cut in September and escalating Middle East tensions limited losses.

Spot gold lost 0.91% to $2,385.70 an ounce. U.S. gold futures fell 0.72% to $2,384.30 an ounce.

(Reporting by Sinéad Carew in New York, Amanda Cooper in London, Wayne Cole in Sydney and Rae Wee and Vidya Ranganathan in Singapore; Editing by Emelia Sithole-Matarise, Bernadette Baum and Gareth Jones)