Global equities rebound after day of cryptocurrency turmoil

Global stocks rallied on Thursday, driven by positive US jobs data, after a murderous day for global markets the day before as cryptocurrencies struggled and the US Federal Reserve’s final minutes left hearing that monetary policy was tightening as the pandemic recovery accelerated.

The S&P 500 rose 0.8%, putting it on track to break a three-day losing streak. The smaller, tech-focused Nasdaq Composite rose 1.4%.

The continent-wide European Stoxx 600 index gained 1 percent, and the UK’s FTSE 100 rose 0.7 percent.

New claims for unemployment assistance in the United States fell to a new pandemic-era low last week, according to Department of Labor data released Thursday, indicating that layoffs continued to slow as some States were preparing to stop offering additional benefits.

The brighter news also came in the wake of the Federal Reserve’s Wednesday minutes, which indicated that some policymakers believed conversations about cutting the central bank’s $ 120 billion in monthly bond purchases should start to grow. as the pandemic recovery gains momentum.

Thursday’s stock rally on both sides of the Atlantic suggested a return to calm after a volatile day for stocks on Wednesday, which saw the S&P 500 index close 0.3% after falling 3% and the Stoxx 600 lose 1.5%. .

“Global risk sentiment seems to be stabilizing. . . after yesterday’s crypto contagion fears led to a broad day of risk reduction in European and US markets, which were already on shaky ground before the [Fed] minutes, ”JPMorgan analysts wrote.

In foreign currencies, the pound rose 0.2 percent against the dollar to $ 1.41, while the euro rose 0.3 percent to $ 1.22. The US dollar, measured against a basket of its peers, fell 0.3 percent.

Arnab Das, global market strategist at Invesco, said the overall picture pointed to a weaker dollar as the United States began to pick up the torch of China’s global growth engine with its expansionary policies.

Cryptocurrencies continued to face considerable volatility, after Chinese regulators signaled a possible crackdown on Wednesday ahead of the launch of their own digital currency. Bitcoin, which topped $ 60,000 last month, fell 30% to $ 30,101 on Wednesday, although it recouped most of its losses. On Thursday, it was trading at $ 41,900 per coin.

“Stocks and cryptocurrencies have shown signs of foaming over the past few months and are expected to take a pullback,” said Richard Saperstein, chief investment officer at Treasury Partners.

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“It’s kind of a transition of the seasons,” said Roger Lee, head of UK equity strategy at Investec, referring to the Federal Reserve minutes. “Obviously, the political outlook will be more stringent, but it’s pretty hard to predict how that will play out in stocks.”

Although index levels haven’t moved much, sector movement has been deep over the past six weeks, he said. The tech sector had been among the victims, as inflationary pressure in the United States intensified.

Lee added that the phase-down was unlikely to be immediate, referring to similar steps taken in 2013: “They started talking about phase-down in March; they didn’t start anything until December. “

Brent fell 0.8% to $ 66.10 a barrel, after hitting $ 70 on Tuesday, only the third time since the start of the pandemic.

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