Wall St mixed as Europe gives up early gains

US equities swung between small gains and losses in afternoon trade on Tuesday as markets continued to settle following last week’s heavy losses.

The blue-chip S&P 500 rose 0.05 per cent, while the tech-heavy Nasdaq rose 0.2 per cent. US indices have steadied this week after recording their biggest weekly fall in two months.

Markets are in a “blackout period” ahead of the release of US labour market data next month, said Steven Blitz, chief US economist at TS Lombard.

“There’s nothing to trade on except kernels of data but the February employment numbers are more important than inflation numbers as employment is the thing that leads to inflation — and since goods inflation is higher now, we need more downward pressure on services, which wages are a big part of.”

European equities gave up early gains to trade slightly lower on the day. The region-wide Stoxx 600 and French Cac 40 closed down 0.1 per cent, while Germany’s Dax ended 0.1 per cent higher.

The moves followed stronger than expected inflation data from France and Spain, two of the eurozone’s largest economies.

The readings added to investors’ concerns that the European Central Bank will need to extend its aggressive policy of raising interest rates for longer to tame inflation. Yields on European government bonds rose as prices fell, with the yields on German Bunds hitting a fresh 12-year high.

Investors in the swaps market expect the ECB to raise interest rates to just below 4 per cent by the end of the year from their current 2.5 per cent. The yield on 10-year German Bunds rose 0.01 percentage points to 2.65 per cent, its highest level since June 2011.

“The question is for how long interest rates will increase and to what level, as well as if there will be a spreading effect from the labour market,” said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers.

Yields on 10-year US Treasuries rose 0.02 percentage points to 3.94 per cent, while the two-year benchmark, which is more sensitive to monetary policy, was flat at 4.79 per cent.

The dollar index, which measures the greenback against a basket of six peer currencies fell 0.1 per cent, while the euro was flat. Sterling gained 0.4 per cent, after rising 1 per cent on Monday as the UK and EU reached a deal on post-Brexit trading rules.

Brent crude rose 1.8 per cent to $83.95 per barrel, while WTI, the US equivalent, gained 2.4 per cent to $77.45 per barrel.

Hong Kong’s Hang Seng index fell 0.8 per cent, while China’s CSI 300 rose 0.6 per cent.