U.S. bond yields surged to the highest in a year, while American stocks climbed to records as optimism over the economic recovery continued to ripple through markets.

The yield on the benchmark 10-year Treasury note increased as much as nine basis points to 1.30 per cent, the highest since February 2020. Global bonds extended the worst start to a year since 2013.

The S&P 500, Nasdaq Composite and Dow Jones Industrial Average indexes all set records Tuesday, before easing from the highs. The MSCI benchmark for emerging and developed market stocks snapped an 11 session winning streak.

The reflation trade is powering assets tied to economic growth and price pressure, including commodities and cyclical stocks. At the same time, investors are riding a wave of speculative euphoria from penny stocks to Bitcoin amid abundant policy support.

“We certainly have data that suggests that being more glass half full than glass half empty remains the right posture,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management. “People are looking at parts of the world as well as sectors that have been underperforming and saying ‘hey this is maybe the next part of the market that heads higher.’”

Here’s a look at how it’s playing out in global markets:

Stocks

The S&P 500 fell less than 0.1 per cent as of 4:01 p.m. in New York. It has added 4.7 per cent so far in 2021. The Russell 2000, which has surged 15 per cent this year, edged lower.

In Japan, the Nikkei 225 Stock Average extended its advance past the 30,000 level. European markets were mostly little changed after a rally on Monday.

Commodities

Brent oil is holding near a 13-month high after freezing temperatures crippled the Texas power system and disrupted crude production. Nearly 5 million people across the U.S were plunged into darkness as homes and businesses lost power. Natural gas futures for March delivery surged as much as 10 per cent.

In metals, copper climbed to the highest since 2012 and tin extended a dramatic surge. Citigroup Inc. forecasts copper prices will rally to US$10,000 a ton in six to 12 months on a better-than-expected recovery in demand, most notably outside China.

Bonds

Global debt markets are extending a selloff as investors shift money to riskier assets. German bunds and U.K. gilts both saw benchmark yields rise. The Treasury 30-year equivalent pushed above 2 per cent.

Currencies

The dollar strengthened against most of its major peers. The pound edged higher to US$1.3911.

Bitcoin crossed a new milestone, surpassing US$50,000 as the blistering rally continues to captivate investors. Tesla Inc.’s announcement that it added US$1.5 billion in Bitcoin to its balance sheet was the most visible recent catalyst. Companies such as Mastercard Inc. and Bank of New York Mellon Corp. have also moved to make it easier for customers to use cryptocurrencies.

Here are some key events coming up:

- Earnings roll on with companies including, Daimler, Credit Suisse, Deere, Danone and Nestle.

- Federal Open Market Committee minutes from the January meeting are due Wednesday.

- U.S. retail sales figures come on Wednesday.