Is Big Tech poised for a big rally?

Good morning, Bull Sheeters. And with the turn of the calendar, a more optimistic mood has overtaken the markets—for this morning, at least.

Stocks across Asia and Europe are up, and that’s lifting U.S. futures—in particular, Nasdaq futures—as investors appear to be buying on last week’s dips. Meanwhile, Treasury yields fell precipitously on Friday, and into the weekend. They’re regaining ground, but only slightly—not enough to sideline the bulls.

In today’s essay, we take a look at the big winners and losers for February, and what that tells us for the month ahead.

But first, let’s see what else is moving markets.

Markets update

Asia

• The major Asia indexes are a blur of green in afternoon trading, with the Hang Seng up 1.6%.
• China had a somewhat rough February. The Lunar New Year holidays and virus restrictions have put the crimp on its economic recovery, the latest economic data revealed.
• Global food prices have soared to a six-year high, bad news for inflation hawks and, more importantly, for the world’s hungry and malnourished.

Europe

• The European bourses were solidly higher with the Stoxx Europe 600 up 1.3% at the open, before climbing further.
• Let’s check in on the bond market: The yields on the closely watched 10-year German bunds are easing lower, and that’s putting additional support behind equities this morning.
• Europe has become the EV capital of the world, overtaking China and the U.S., with some 99 new electric models hitting the market in the coming year. But it’s a dominance built upon generous subsidies, and, once they expire, analysts warn, the market could hit the skids.

U.S.

• U.S. futures point to a strong open. That’s after all three major indexes finished last week in the red, with the Nasdaq suffering its worst weekly performance since October.
• Shares in Walmart are up 0.1% in pre-market trading after it was revealed over the weekend the retail giant had poached two rising stars from Goldman Sachs to help lead its new fintech startup.
• In his annual letter to investors, Warren Buffett revealed his Berkshire Hathaway spent nearly $25 billion in share-buybacks last year—but it still held a staggering $138 billion cash pile at year-end. Shares are flat in pre-market this morning.

Elsewhere

• Gold is up, trading above $1,750/ounce.
• The dollar is down.
• Crude is up with Brent trading above $65/barrel.
• At 11 a.m. Rome time, Bitcoin was trading 4% higher at $47,000 after the cryptocurrency plunged to a three-week low over the weekend.

***

Winners and losers

As we do at the start of each month, it’s time to look back and tally up some of the best- and worst-performing assets of the past month.

Equities and bonds limped into March on a low note. Tech stocks, in particular, took it on the chin with the Nasdaq slumping more than 4% last week. The good news: the tech-heavy index still managed to eke out a 1% gain for the month.

Bitcoin, too, ended the month up an impressive 34.7%—even though it’s fallen more than 20% from its Feb. 21 all-time high of $58,332.

According to Deutsche Bank, here are some of the other big winners and losers (in terms of total returns, priced in dollars) for February:

• Crude is king: Brent (+18.3%) and WTI (+17.8%) for the month.
• Banking on banks: DJStoxx 600 banks (+15.8); S&P 500 Financials (+11.5%).
• Bonds are bombing: 10-year Treasury prices down 2.3%; German bunds: -1.9%.
• King copper: +15.1%.
• Gold losing its luster: -6.1%.
• Elsewhere in equities: S&P 500 (2.8%), Nikkei (4.8%), DAX (2.6%), Hang Seng (2.5%).

January was steady and stable. February was anything but; it was really a month of two halves. The slump in stocks coincided, of course, with the sell-off in bonds and corresponding rise in yields.

And the rise in yields is a two-headed story. Investors are selling long-term bonds because they see economic growth on the horizon. But a growth jolt could translate to rising prices, and, hence, investor jitters about rate hikes. That push and tug, in turn, will exacerbate the gap between the winners and losers going forward.

First, let’s address the winners. Rising real rates should continue to propel bank and energy stocks. On the flip side, stocks that are exposed to secular growth—think tech—will be hit with headwinds, says Deutsche Bank research strategist Jim Reid.

This will probably be the script in the month ahead unless the Fed, ECB and BOE step in and declare, enough is enough.

Deutsche Bank’s Reid, for one, believes such intervention from central banks is inevitable. “There is little doubt in my mind that central banks will eventually lean quite hard against a sustained rise in yields. They simply can’t afford to see it happen with debt so high,” he wrote in this morning’s research note.

That would be really good news for Big Tech and growth stocks.

Whatever happens, March will anything but boring.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Are cryptos currency? Every now and then, I quote UBS chief economist Paul Donovan here in Bull Sheet. He's produced a two-minute video examining the thorny question of whether we should consider Bitcoin and its ilk a currency, or merely as a speculative asset to trade? It doesn't resemble a currency, he says, because of one notable reason: you cannot use it to pay taxes. But the bigger problem for Bitcoin, he says, is that its relationship to supply and demand is totally out of whack. If you pay little regard to the latter, he warns, you have zero guarantee of ascertaining its future value.

Supercycles. From copper to corn, the rally in commodity prices has been one for the ages. It's what analysts call a "supercyle," a phenomenon that investors around the world have been eagerly researching to see if it could impact their portfolio—or reveal a great investment opportunity.

What goes up... Veteran economist and markets-watcher David Rosenberg is not at all vexed by the bond markets. He predicts the yield on 10-year Treasuries is destined to fall as "the bond market is radically oversold," he told CNBC.

Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.

Market candy

Convexity hedging

That's a term you can use to impress your markets-obsessed friends. What is it? It's a popular trade of mortgage bonds that appears to be unraveling fast as the yields on longer-term Treasuries rise unexpectedly. First, it's important to understand: As T-bill yields head higher, mortgage rates tend to climb. And that sets off a domino effect—homeowners are less inclined to refinance their mortgages, leaving mortgage bondholders with a less reliable stream of payments. What do they do at this point?

"Their answer," Bloomberg explains, "unload the Treasury bonds they hold with long maturities or adjust derivatives positions—a phenomenon known as convexity hedging—to compensate for the unexpected jump in duration on their mortgage portfolios. The extra selling just as the market is already weakening has a history of exacerbating upward moves in Treasury yields—including during major “convexity events” in 1994 and 2003."... It also appears to be what's happening now.