Opening Bell: Global Markets Rebound But Volatility Lingers; Gold, Oil Rally

 | Dec 01, 2021 07:38AM ET

  • Dollar rises despite Powell testimony 
  • Treasury yields flatten on Fed hawkishness
  • Oil recovers
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US equity futures on the Dow, S&P, NASDAQ and Russell 2000 rallied ahead of the New York session open during Wednesday's trading. European stocks also rebounded as traders continued to whipsaw between risk-on and risk-off sentiment regarding the level of threat from the Omicron variant of COVID-19 and the news from the US Fed that it will likely increase the pace of monetary tightening.

Bitcoin edged higher. 

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All four US index futures were trading well in the green though there was no clear trend at time of writing. On the one hand, contracts on the Russell 2000, the most sensitive of the major US indices to coronavirus restrictions, outperformed. But Dow futures, which also list value stocks, underperformed. Contracts on the NASDAQ 100, which hosts mega cap tech stocks that soared during lockdowns were the second-best performing among the futures indices.

In Europe, the STOXX 600 rallied with mining, energy and travel stocks—all sectors of the reflation trade—almost erasing Tuesday's losses which had sealed the third monthly decline this year for the pan-European gauge.

Eurozone inflation increased which may dampen future growth and continue to boost the cost of raw materials which are increasing at their fastest pace in more than two decades.

Earlier Wednesday, Asian shares were mixed, though most significant benchmarks rose. South Korea's KOSPI outperformed, up 2.1%. Hong Kong's Hang Seng climbed 0.8%. Japan's Nikkei 225 advance was more tempered as the detection of the Omicron variant there provoked worries of further social restrictions.

US stocks sold off during Tuesday's session after Fed boss Jerome Powell hinted at quicker bond tapering in his testimony to Congress. That meant the robust gains seen earlier in November virtually disappeared as markets stumbled as they finished out the month yesterday.

Powell sent a shudder through markets when underlining to the Senate banking committee that the Fed will no longer use the term "transitory" in its comments on inflation, suggesting the bank is preparing for protracted high inflation.

The S&P 500 dropped almost 2%, wiping out its November advance and volatility increased with the VIX registering its sharpest monthly jump since February 2020.

Yields on the 10-year Treasury note bounced but remained below 1.50% after dropping to 1.48% yesterday, the lowest since Nov. 9 and almost to the lowest since Sept. 23.