Investors are ignoring last week’s selloff detonator

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By Natasha Doff

The global stock rally marched ahead as investors took in stride a jump in benchmark Treasury yields toward 3 percent. The dollar fell for a fifth day, while the the yen and crude oil advanced.

The Stoxx Europe 600 Index took its cue from a rally in Asian equities to advance for a second day. Futures on the S&P 500 Index signaled U.S. stocks will open higher. The yield on 10-year Treasuries climbed for a second day and held above 2.9 percent. Metals gained, while South Africa’s rand traded at its strongest level in almost three years after President Jacob Zuma resigned.

Bond traders increased their expectations for the number of Federal Reserve interest-rate hikes to four by the end of next year after a report showed U.S. consumer prices rose in January more than projected. The inflation figures gave rise to debate among investors and traders on the breakdown in correlations to interest rates, as currency investors focused instead on the U.S.’s twin deficits.

Stocks remain cheap relative to bonds and won’t be affected by higher long-term interest rates as long as the 10-year Treasury yield stays below 4 percent, according to Gina Martin Adams and Peter Chung, equity strategists at Bloomberg Intelligence.

Japan’s Finance Minister Taro Aso’s comments that the yen’s strength is not abrupt enough to require intervention supported the Japanese currency’s rally. Hong Kong equities sealed their best three-day run in more than two years in shortened trading ahead of the Lunar New Year holiday. China, South Korea, Taiwan, Vietnam markets are closed Thursday.

Here are some important things to watch out for this week:

Jobless claims and PPI data are due to be released in the U.S. today A handful of European Central Bank officials are due to speak Thursday and Friday. Earnings season continues in full swing. Lunar New Year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
These are the main moves in markets:

Stocks
The Stoxx Europe 600 Index gained 0.7 percent as of 11:38 a.m. London time, the highest in more than a week. Germany’s DAX Index increased 0.7 percent to the highest in more than a week. The MSCI All-Country World Index climbed 0.6 percent, hitting the highest in almost two weeks with its fifth consecutive advance.

Currencies
The Bloomberg Dollar Spot Index dipped 0.3 percent, reaching the lowest in two weeks on its fifth straight decline. The euro increased 0.3 percent to $1.2484, hitting the strongest in two weeks with its fifth straight advance. The Japanese yen advanced 0.4 percent to 106.57 per dollar, the strongest in about 15 months. The British pound jumped 0.4 percent to $1.4057, the strongest in almost two weeks. South Africa’s rand gained 0.4 percent to 11.6684 per dollar, the strongest in about three years.

Bonds
The yield on 10-year Treasuries climbed two basis points to 2.93 percent, the highest in more than four years. Germany’s 10-year yield gained three basis points to 0.79 percent, the highest in more than two years on the biggest gain in more than a week.

Commodities
West Texas Intermediate crude gained 0.1 percent to $60.69 a barrel, the highest in a week. Gold climbed 0.1 percent to $1,352.17 an ounce, the highest in more than three weeks. Copper declined 0.2 percent to $3.23 a pound.

Source: Economic Times