US stocks wavered in the first trading session of 2022 as a sharp decline in the price of American government debt kept attention locked on the inflation outlook.
The S&P 500 rose 0.6 per cent in opening deals as carmaker Tesla surged 10 per cent on the back of record quarterly deliveries. The rally quickly fizzled, however, leaving the benchmark Wall Street stock index fluctuating between small gains and losses.
The Europe-wide Stoxx 600 index gained 0.5 per cent, reaching a record intraday high, with Germany’s Dax up 1 per cent and the Cac 40 in Paris rising 1 per cent. Bourses in London, Japan and mainland China were closed for holidays.
Government bonds came under selling pressure, with the yield on US 10-year Treasuries jumping 0.11 percentage points to 1.6 per cent. Germany’s 10-year Bund yield rose 0.04 percentage points to minus 0.14 per cent.
Monday’s market moves followed a strong year for equities in 2021, powered by a flood of government and central bank stimulus that combined with the global economic recovery from the depths of the pandemic, analysts and investors said.
The Stoxx 600 closed out 2021 with a 22 per cent advance, reversing the 4 per cent fall the previous year. The S&P 500 marked its third straight year of double-digit gains with a rally of 27 per cent.
“With speculative spirits high, investors will need to gauge return per unit of risk as volatility reappears,” Sean Darby, an analyst at Jefferies, said. “Perhaps equity investors should be more concerned that policymakers might get boxed in by trying to tame inflation with higher rates without upsetting asset markets.”
Tesla surged on Monday after the carmaker negotiated supply chain disruption to report forecast-beating deliveries for the fourth quarter.
Rival automakers gained in response, with Volkswagen and BMW rising more than 2 per cent in Europe. Lufthansa led the travel stocks higher after Citigroup added the airline to its “buy” list on optimism about the revived demand for long-haul flights.
Investors were starting the year with several risks bubbling in the background, said Karl Steiner, a strategist at Swedish bank SEB. Evergrande’s notice on Monday that it would again suspend its shares in Hong Kong injected “a bit of uncertainty”, Steiner added.
The property developer has been at the centre of a sector-wide crisis in the world’s biggest emerging markets for months. Hong Kong’s Hang Seng share index fell 0.5 per cent on Monday, with the property development sector off 1.1 per cent.
Mounting tensions between western countries and Russia have also caught investors’ attention, with US president Joe Biden warning that his country would act “decisively” should Russia invade Ukraine.
The spread of the highly transmissible Omicron strain of coronavirus, elevated global inflation and the removal of central bank stimulus measures are other factors that are looming large.
Oil prices drifted on both sides of the Atlantic ahead of an Opec meeting on Tuesday to discuss boosting output. Brent crude, the international benchmark, ticked up 0.6 per cent at $78.20 a barrel, having earlier risen as much as 1.5 per cent on reports that Libya’s production had been choked off by a damaged pipeline.
A survey on the US manufacturing sector, due for publication on Tuesday, along with the monthly jobs report on Friday, could provide further direction in the first trading week of the year.
