US stocks rallied on the first day of the fourth quarter, notching their largest daily increase since August after the UK government on Monday reneged on its plans for an unfunded tax cut that had spooked investors and roiled bond markets.
Wall Street’s benchmark S&P 500 share index closed up 2.6 per cent, while the technology-heavy Nasdaq Composite added 2.3 per cent. Both indices recorded their biggest daily increases since August.
US stock indices have had a bruising year to date, with declines over each of the three quarters to September in the longest quarterly losing streak since 2008.
“What we’re seeing today is not necessarily healthy,” said George Goncalves, head of US macro strategy at MUFG. “People are very hopeful and wishful and want to put September behind them, but the underlying problems are still out there.”
US government bonds rallied sharply on the first trading day of the fourth quarter, with the yield on the benchmark 10-year Treasury note sliding 0.18 percentage points as its price rose. The two-year yield, which is more sensitive to changes in interest rate forecasts, shed 0.09 percentage points to 4.12 per cent. Ten-year gilt yields similarly slid on Monday, falling 0.19 percentage points to 3.96 per cent.
Concerns have intensified this year that the US Federal Reserve and other central banks will raise borrowing costs so fast in their efforts to curb inflation that they compound a global economic downturn.
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