Global stocks rebound after day of cryptocurrency turbulence

Global stocks climbed on Thursday, driven by positive US jobs data, after a bruising day for global markets the day before as cryptocurrencies whipsawed and the US Federal Reserve’s latest minutes hinted at tighter monetary policy to come as the pandemic recovery gathered pace.

The S&P 500 rose 0.8 per cent, putting it on track to snap a three-day losing streak. The smaller, technology-focused Nasdaq Composite was up 1.4 per cent.

Europe’s continent-wide Stoxx 600 index gained 1 per cent, and the UK’s FTSE 100 was up 0.7 per cent.

New applications for unemployment aid in the US fell to a fresh pandemic-era low last week, according to labour department data released on Thursday, indicating that lay-offs continued to slow as some states prepared to stop offering supplemental benefits.

The brighter news also came in the wake of Wednesday’s minutes from the Federal Reserve, which indicated that some policymakers thought the conversations about scaling back the central bank’s $120bn in monthly bond purchases would need to begin as the pandemic recovery gained momentum.

Thursday’s equity rises 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 per cent down after falling as much as 3 per cent and the Stoxx 600 lose 1.5 per cent.

“Global risk sentiment appears to be stabilising . . . after yesterday’s crypto contagion fears drove a broad risk-off day across European and US markets, which were already on shaky ground ahead of the [Fed] minutes,” analysts at JPMorgan wrote.

In currencies, the pound rose 0.2 per cent against the dollar to $1.41, while the euro increased 0.3 per cent to fetch $1.22. The US dollar, as measured against a basket of its peers, dropped 0.3 per cent.

Arnab Das, a global market strategist at Invesco, said the overall picture pointed to a weaker dollar as the US began to retake the mantle of global growth driver from China through its expansionary politics.

Cryptocurrencies continued to face considerable volatility, after Chinese regulators signalled a potential crackdown on Wednesday ahead of launching their own digital currency. Bitcoin, which had soared past $60,000 last month, fell as much as 30 per cent to a low of $30,101 on Wednesday, although it clawed back most of its losses. On Thursday, it was trading at $41,900 per coin.

“Stocks and cryptocurrencies have been showing signs of froth over the past few months and were due for a pullback,” said Richard Saperstein, chief investment officer at Treasury Partners.

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“It’s sort of a transition of the seasons,” said Roger Lee, head of UK equity strategy at Investec, referring to the Federal Reserve minutes. “Clearly, there’s going to be a tighter policy outlook, but how that plays out in equities is quite difficult to predict.”

While index levels have not moved much, sectoral movement had been profound in the past six weeks, he said. The technology sector had been among the victims, as inflationary pressure in the US mounted.

Lee added that tapering was unlikely to be immediate, referring to similar measures taken in 2013: “They first started talking about tapering in March; they didn’t start doing anything until December.”

Brent crude dropped 0.8 per cent to $66.10 a barrel, having reached $70 on Tuesday, only the third time since the start of the pandemic.

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