Rally may have more to do with short-covering by hedge funds than new money piling into equities, analyst warnsLondon — World stocks climbed to five-week highs on Wednesday as investors ignored a broadening sell-off in global bond markets that’s been fuelled by a combination of soaring inflation and hawkish comments from US policymakers.
European stocks also rose, with a pan-European equity benchmark hitting a one-month high in early London trading. US stock futures signalled small gains. Battered e-commerce giant Alibaba, which recently expanded a buyback programme, rose 6% and in Tokyo out-of-favour tech investment firm SoftBank Group rose 7%. The main US tech index ended up 2% overnight cutting its year-to-date losses to 10% from 20% at mid-March.
The sell-off in short-dated yields prompted Fed fund futures to price in an aggressive 190 bps of rate hikes for the rest of 2022 after a 25 bps rate hike last week. Futures were nearly pricing in the probability of a 50 bps hike in May.