Stock recovery in Europe led by tech; dollar slips

European stocks bounced back from their biggest decline in six weeks as Treasury yields steadied a day before a key American inflation reading.

European stocks bounced back from their biggest decline in six weeks as Treasury yields steadied a day before a key American inflation reading.

Technology stocks led the advance in the Stoxx Europe 600 Index after the tech-heavy Nasdaq 100 recovered on Monday following four negative sessions. U.S. futures edged higher. Benchmark Treasury yields stabilized near 1.75 per cent after reaching 1.8 per cent in intraday trading Monday.

The moves reversed days of selling of pricey tech and high-growth stocks driven by bets the U.S. Federal Reserve will speed up the pace of monetary tightening. Wednesday’s report on U.S. consumer-price inflation is set to be a further call to action for policy makers, with the rate anticipated to have increased further in December to 7.1 per cent, the fastest pace in almost four decades.

“It’s very well embedded now that inflation in many parts of the world won’t be transitory, that there still are some supply-chain issues that will linger,” Kerry Craig, JPMorgan Asset Management global market strategist, said on Bloomberg Television. “That does mean central banks are pretty keen to get onto the tightening path.”

Swaps indicate the Fed’s target will be 88 basis points higher by the end of this year -- seen by many as a sign the market is baking in three hikes, plus the possibility of a fourth -- and momentum is building for the first increase to take place as soon as March.

U.S. Federal Reserve Chair Jerome Powell said the U.S. economy was expanding at a fast pace and the central bank will prevent higher inflation from becoming entrenched. In remarks for his Senate confirmation hearing, he also cautioned that the post-pandemic economy might look different than the previous expansion.