Equities stabilize as oil prices ease, while Treasury bond yields surge to their highest level in four months

Global equities climbed on Monday as oil prices retreated from a six-month high, while U.S. bond yields surged to their highest level since late November amid speculation about Federal Reserve interest rate adjustments.

In early trading, Europe’s STOXX 600 index edged 0.05% higher after a 1.2% decline the previous week, with Germany’s DAX up 0.38%, but Britain’s FTSE 100 down 0.19%.

U.S. S&P 500 futures dipped 0.2%, following a 0.9% drop the previous week, while Nasdaq futures slipped by a similar margin.

The stock markets encountered turbulence at the start of the second quarter, driven partly by concerns over escalating tensions in the Middle East, which elevated oil prices. Additionally, robust U.S. economic data heightened worries about the extent to which central banks could reduce borrowing costs.

However, oil prices saw a decline on Monday as geopolitical tensions eased, with Israel withdrawing troops from southern Gaza and progress reported in truce negotiations in Cairo.

Brent crude fell 1.1% to $90.20 a barrel after reaching a six-month high of $91.91 the previous week. Despite the dip, oil prices remain elevated, and with global supply constraints, there’s no immediate catalyst for prices to ease, according to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

The much stronger-than-expected U.S. jobs report on Friday prompted investors to scale back expectations of a June rate cut by the Fed, reducing the probability from around 59% to 48% as of Monday.

This shift in expectations led to a rise in 10-year U.S. Treasury yields to 4.45%, the highest since late November, up 7 basis points.

Investor attention this week is on the U.S. consumer price index (CPI) report on Wednesday, which is expected to show core inflation slowing to 3.7% in March. Any downtrend in inflation data could influence the Fed’s stance on interest rates.

The European Central Bank is set to announce its interest rate decision on Thursday, with investors awaiting signals regarding potential rate cuts starting in June following lower-than-expected inflation figures in March.

In the currency markets, the U.S. dollar index remained stable at 104.33, while the Japanese yen continued to face pressure, with the dollar approaching its highest level since 1994 against the yen, prompting vigilance for possible intervention by Japanese authorities.

In China, mainland stocks reopened after an extended holiday, with the blue-chip gauge down 0.88%. Meanwhile, Hong Kong’s Hang Seng Index rose 0.07%, and Japan’s Nikkei 225 climbed 0.91%.

Spot gold reached a new record high at $2,353.80 an ounce, gaining 0.3% by the last update.

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