By Chuck Mikolajczak
NEW YORK (Reuters) - A gauge of global stocks was on track for its biggest one-day percentage climb in a week on Tuesday as a fall in U.S. Treasury yields eased concerns the economic recovery could overheat and lead to stronger-than-expected inflation.
U.S. Treasury yields fell with eyes on the $120 billion auctions of 3-, 10-, and 30-year Treasuries this week, as a weak 7-year note sale that prompted a spike in yields two weeks ago was followed by another soft auction last week.
Benchmark 10-year notes last rose 10/32 in price to yield 1.5594%, from 1.594% late on Monday. The note has topped 1.6% three times since Feb. 25, reaching levels not seen in over a year.
On Wall Street, each of the major averages were higher, led by a gain of more than 3% in the Nasdaq, putting the tech-heavy index on track for its biggest one-day percentage rise in just over four months. The index has been highly susceptible to climbing rates, and Monday's retreat left it down more than 10% from its Feb. 12 close, confirming what is widely considered to be a correction.
"It’s the tail wagging the dog; it is interesting the focus has really shifted to the impact of extremely aggressive fiscal spending on the likelihood of inflationary pressures becoming once more a mainstay of the investing landscape," said Peter Kenny, founder of Kenny’s Commentary LLC and Strategic Board Solutions LLC in Denver.
"This is an expected, highly predictable, and, I dare say, welcome response, and it is all about velocity."
The Dow Jones Industrial Average rose 263.57 points, or 0.83%, to 32,066.01, the S&P 500 gained 66.58 points, or 1.74%, to 3,887.93 and the Nasdaq Composite added 394.01 points, or 3.12%, to 13,003.18.
In Europe, a fall in yields helped stocks shrug off data showing a bigger than expected fall in fourth-quarter euro zone economic output, although gains were less pronounced than in the United States after European equities jumped more than 2% on Tuesday.
Investors will also closely watch a European Central Bank meeting later this week to see if policymakers have decided to step up the pace of emergency bond purchases to appease skittish markets.
Data on Tuesday showed the ECB barely nudged up its emergency bond purchases last week even before subtracting debt that matured over that period, raising fresh questions about the central banks' resolve to curb a bond market sell-off.
The pan-European STOXX 600 index rose 0.72% and MSCI's gauge of stocks across the globe gained 1.48%.
The speedier rollout of COVID-19 vaccines in some countries and the United States' planned $1.9 trillion stimulus package helped underpin a brighter global economic outlook, the Organisation for Economic Cooperation and Development (OECD) said, as it raised its 2021 growth forecast to 5.6%.
Germany's 10-year government bond yield last rose 6/32 in price to yield -0.298%, from -0.278% on Monday, moving further away from the near one-year high of -0.203% in late February.
In foreign exchange markets, the dollar index backed away from a 3-1/2-month high, allowing riskier currencies such as the Aussie and the Kiwi dollar to move higher.
The dollar index fell 0.312%, with the euro up 0.34% to $1.1883.
Oil prices backed off earlier highs in choppy trading, with Brent dipping back to the $68 mark as investors weighed easing concerns over a supply disruption in Saudi Arabia with the likelihood of limited supply from OPEC+ output limits.
U.S. crude recently fell 0.57% to $64.68 per barrel and Brent was at $68.12, down 0.18% on the day.