Investors are gaining confidence that March’s rally in equities and credit markets has further to run.
The Stoxx Europe Index and the MSCI Asia Pacific Index were on course for the highest closes in two months. Shares in Egypt extended the longest rally since December after the country’s central bank devalued its currency, and the thawing in the riskiest type of bank bonds enabled UBS Group AG to hold the first sale of the riskiest type of bank debt in Europe for two months.
Economic data around the world suggest the global economy is far from the recession scenario that wiped almost $9 trillion off the value of equities worldwide this year through mid-February, and central banks are indicating they’ll support asset prices when needed. The Bank of Japan, which adopted a negative interest rate in January, will conclude a policy review on Tuesday and a Federal Reserve meeting ends Wednesday.
European stocks have rebounded 14% from last month’s low, with commodity producers and banks leading the gains. After a mixed initial response to the European Central Bank’s latest stimulus measures, the Stoxx erased weekly losses on Friday to post its longest streak of weekly advances in a year. Commodity producers posted the biggest advance of the 19 industry groups, with Glencore Plc and Anglo American Plc leading the advance.
The Fed’s two-day meeting this week will be in focus as investors seek indications of the trajectory of interest rates. While traders are pricing in little chance of an increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now about 50% , from less than 2% a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities. Benchmark Treasuries rose on Monday, with the 10-year yield falling two basis points to 1.97%. Morgan Stanley forecast the rate will fall to 1.45% by the end of September, approaching the record low of 1.38% set in 2012, and said the Fed will wait until December before raising interest rates. The U.S. bank also cut its end-2016 projection to 1.75% and lowered forecasts for yields on similar-maturity debt issued by Germany, Japan and the U.K., according to a report released on Sunday.