US, Euro. stocks touch record highs
Dollar cheered by rising US yields
NEW YORK (Reuters) – Wall Street opened higher on Tuesday, with the S&P 500 and Nasdaq touching all-time intraday peaks, as US equities tracked European stocks and global bond yields.
Investor sentiment has been bolstered by historically low US stock market volatility, last weekend’s French presidential election result and solid corporate earnings.
The S&P 500 opened at an all-time record 2,401 points and the VIX index of implied volatility – known as the Wall Street “fear gauge” – fell to 9.56 points, the lowest since late 2006.
The Dow Jones Industrial Average rose 21.04 points, or 0.1%, to 21,033.32, the S&P 500 gained 3.16 points, or 0.13%, to 2,402.54 and the Nasdaq Composite added 24.47 points, or 0.4%, to 6,127.13.
Europe’s index of leading 300 shares rose to a near-two year high of 1,556.3 points, Germany’s DAX hit a record high, and Britain’s FTSE 100 added 0.6%.
The 10-year US Treasury yield rose to its highest in five weeks before a $24 billion auction of a three-year government debt. German yields rose by 1-2 basis points and the 10-year British gilt yield rose around 4 basis points.
“It’s calm sailing today for stock markets,” ETX Capital senior markets analyst, Neil Wilson, said.
Victory for business-friendly centrist Emmanuel Macron in France and earnings were also supportive for equities, he said, adding: “So far, there is precious little to halt the rotation from bonds to stocks.”
In commodities, oil market sentiment swung between optimism over statements from major oil-producing countries that supply cuts could be extended into 2018 and lingering concerns over slowing demand and a rise in US crude output.
Copper bounced from the four-month low touched on Monday after data showed a sharp drop on imports into China, the world’s biggest consumer. London copper rose 0.5% to $5,515 a ton on Tuesday, after falling to as low as $5,462.50 on Monday.
Gold prices touched a nearly eight-week low on Tuesday, indicating a shift in investor preference for riskier assets.
Spot gold dropped 0.7% to $1,217.38 an ounce. US gold futures fell 0.79% to $1,217.40 an ounce. Copper rose 0.78% to $5,529.00 a ton. Asian stocks did not perform as well, with China’s seventh consecutive decline – the longest losing streak for four years – weighing on the region more broadly.
The positive sentiment and rising US Treasury yields also boosted the dollar.
The dollar index rose 0.45%, with the euro down 0.28% to $1.0891.
The dollar surged to nearly two-month highs against the yen on Tuesday as risk appetite improved following the French election and investors focused on monetary policy and potential upcoming Federal Reserve interest rate hikes.
US benchmark 10-year Treasury yields hit five-week highs, with rate futures pricing in close to a 90% chance of an interest rate increase next month. Yields on US twoyear notes, the tenor most sensitive to rate hike expectations, also advanced on Tuesday, climbing to eight-week peaks.
The dollar index, tracking the greenback’s value against six major currencies, rose to a three-week high, in line with the gains in yields.
“While the US economy saw a marked deceleration in the first quarter, the overall outlook remains solid and the Fed is still widely expected to raise US lending rates in June and likely again in September,” said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
The interest rate premium investors receive for holding dollar 10-year government bonds instead of their yen equivalents rose to its highest since the end of March overnight.
In late morning trading, the dollar was up 0.7% against the yen at 114.08 yen, after earlier hitting its highest level since mid-March. The euro also rose against the yen, up 0.5% at 124.27 yen.
The Swiss franc, another currency with firmly negative interest rates as well as a central bank actively seeking to weaken it with market intervention, fell to its lowest against the euro since mid-October. It was down just over 2% against the euro over the last two weeks, compared to an almost 3% fall in the dollar.