US, European equities advance; crude drops on Iraq exemption

Gold firms as dollar retreats from 9-month high

NEW YORK, Oct 24, (Agencies): Stock markets rose on Monday, with Wall Street higher on several big deals and Europe led by a surge in Spain’s IBEX index, while oil prices fell after Iraq said it wanted to be exempt from an OPEC deal to cut production.

Merger and acquisition activity spurred Wall Street, headed by Saturday’s announcement by telecommunications company AT&T Inc that it plans to buy Time Warner Inc for $85.4 billion in what would be the biggest deal in the world this year if approved by regulators.

“The deal activity suggests that companies are feeling positive about the prospects of the economy and that is encouraging,” said Peter Cardillo, chief market economist at First Standard Financial.

Iraqi oil minister Jabar Ali al-Luaibi said Baghdad wants to be exempt from any production cut the Organization of the Petroleum Exporting Countries is aiming to achieve.

Brent crude futures were down about 1 percent, or 51 cents, at $51.27 a barrel by 1500 GMT. US West Texas Intermediate (WTI) crude was also about 1 percent lower, by 54 cents at $50.30.

However, losses were capped by comments from Iran’s deputy oil minister Amir Hossein Zamaninia, who said Tehran would encourage other OPEC members to join an output freeze.

The Dow Jones industrial average rose 91.87 points, or 0.51 percent, to 18,237.58, the S&P 500 gained 10.17 points, or 0.47 percent, to 2,151.33 and the Nasdaq Composite added 46.70 points, or 0.89 percent, to 5,304.10.

AT&T was down 1.52 percent and Time Warner was last down 2.22 percent. AT&T’s Chief Executive told investors he expects the planned acquisition to receive regulatory clearances.

TD Ameritrade also said it would buy privately held Scottrade Financial Services in a deal valued at $4 billion. And little-known China Oceanwide Holdings Group pledged $3.8 billion in a deal to take control of US insurer Genworth Financial.

Spain’s IBEX index led gains in Europe on signs that 10 months of political deadlock could end. The impasse has paralyzed government in one of the countries worst-hit by the euro zone’s debt crisis.

The IBEX was up 1.27 percent, outstripping its German and French equivalents, which were 0.47 percent and 0.36 percent higher, respectively.

US Treasury yields lurched higher, in line with a rise in global bond yields, with traders seeing little action ahead of next week’s Federal Open Market Committee meeting.

Yields on benchmark German Bunds rallied from three-week lows, while UK bonds rose from one-week troughs.

MSCI’s broadest index of AsiaPacific shares outside Japan rose 0.42 percent. Japan’s Nikkei was 0.29 percent higher while Shanghai outperformed, rising 1.21 percent.

US

US stocks touched their highest levels in two weeks as a flurry of deal activity and strong quarterly earnings boosted investor confidence.

Investors are also parsing quarterly earnings reports from companies. More than a third of the S&P 500 components are scheduled to report earnings this week, including heavyweights such as Apple and Boeing.

“It’s been a pretty good quarter for earnings so far and we might finally see the end of earnings recession. If you look at the companies that have reported so far, most of them have outperformed the long-term average in profit and revenue,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

Third-quarter earnings are expected to increase 1.1 percent after four consecutive quarters of contraction, according to Thomson Reuters data. Of the 120 S&P companies that have reported earnings, 77.5 percent have beat analyst expectations, above the long-term average of 63.5 percent.

“M&A activity is generally seen as a bullish trend for the market,” Frederick said.

AT&T was down 1.6 percent at $36.88 after the telecommunications company said it would buy Time Warner Inc for $85.4 billion. If approved by regulators, this would be the biggest deal in the world this year. Time Warner Inc was down 2.2 percent at $87.56.

At 12:45 pm ET (1645 GMT), the Dow Jones industrial average was up 54.48 points, or 0.3 percent, at 18,200.19, the S&P 500 was up 6.97 points, or 0.33 percent, at 2,148.13 and the Nasdaq Composite was up 41.65 points, or 0.79 percent, at 5,299.05.

Nine of the 11 major S&P sectors were higher, with technology index’s 0.92 percent rise leading the advancers.

Microsoft was up 1.4 percent at $60.50 and was the biggest boost on the S&P and Nasdaq.

T-Mobile US jumped as much as 7.8 pct to a more than nine-year high of $50.41, after the wireless provider reported a better-than-expected quarterly profit and raised its forecast for customer additions for the year.

The dollar index was little changed at 98.75 against a basket of major currencies, after touching its highest level since early February, last week. A strong dollar could dent the earnings of large multinationals.

TD Ameritrade fell 2.9 percent to $35.99 after it said it would buy privately held Scottrade Financial Services

in a deal valued at $4 billion.

Europe

European shares ended flat on Monday with continued gains in banks offset by weakness among pharma stocks, while Spain outperformed on signs of an end to a political deadlock.

The pan-European STOXX 600 index ended flat at 344.26 points. The index is down 5.9 percent so far this year.

The STOXX 600 Bank index rose 1.4 percent, making gains for the fifth session in a row and erasing all of its losses since Britain voted to leave the European Union in June.

Sentiment in the sector was brightened by an upbeat note from JP Morgan strategists that recommended investors buy into banks on prospects of rising global yields.

“Euro banks keep facing profitability pressures, but we believe that banks remain a good place to hedge out the risk of rising bond yields and rising inflation,” they said in a note.

Spanish banks were among the strongest. Spain’s IBEX rose 1.3 percent, hitting a six-month high as the country looked set end a 10-month long political deadlock.

Elsewhere in the sector, Monte dei Paschi soared 28 percent as the Italian bank was set to unveil a capital-boosting and new business plan on Monday.

The STOXX 600 healthcare index fell 0.7 percent. Actelion, down 3 percent, was the biggest faller among drugmakers after brokers cut their price targets, while heavyweights AstraZeneca and Roche fell 2 percent and 0.7 percent respectively.

Syngenta fell 5.8 percent after the European Union said that ChemChina had missed a deadline to offer concessions to regulators regarding its $43 billion bid for the Swiss pesticides and seeds group.

Baader Bank said while the share price reaction was understandable, it still expected the deal to be closed even though it could suffer a delay into the first half of next year. Shares in Aixtron fell 13 percent. Media firms came in focus after AT&T agreed to buy Time Warner for $85.4 billion over the weekend.

Shares in ITV and Sky rose as much as 2.8 and 2.4 percent respectively, buoyed by the AT&T takeover news before paring gains.

Asia

Shanghai led a broad rally across Asian stock markets Monday on hopes China will unveil fresh economyboosting measures, while the dollar’s early strength waned through the day.

The upbeat outlook helped push Shanghai up 1.2 percent by the close, while Hong Kong was one percent higher. Tokyo ended up 0.3 percent, Seoul gained 0.7 percent and Singapore was 0.7 percent higher in late trade. However, Sydney dipped 0.4 percent.

In afternoon Asian trade the dollar was well down from the 104 yen levels flirted with earlier, while the pound climbed back above $1.22.

The euro edged up but was also struggling after Friday’s sell-off fuelled by speculation the European Central Bank would unveil fresh stimulus measures in December.

In Seoul troubled shipping company Hanjin collapsed almost 14 percent at one point after it said it would close its European business.

The firm said it had applied for court approval to close all of its European units in more than 10 countries including Germany, where it has its regional headquarters. It finally closed down 11.8 percent.

Key figures around 0800 GMT Tokyo — Nikkei 225: Up 0.3 percent at 17,234.42 (close)

Hong Kong — Hang Seng: Up 1.0 percent at 23,604.08 (close)

Shanghai — Composite: Up 1.2 percent at 3,128.25 (close)

Oil

Oil prices fell on Monday as Iraq said it wanted to be exempt from an OPEC deal to cut production, though losses were capped by Iran saying it would encourage other members to join an output freeze.

Brent crude futures were down 45 cents at $51.33 a barrel by 1340 GMT. US West Texas Intermediate (WTI) crude was down 61 cents at $50.23.

Iraqi oil minister Jabar Ali al-Luaibi said Baghdad wants to be exempt from any production cut the Organization of the Petroleum Exporting Countries is aiming to achieve.

Falah al-Amiri, head of Iraqi state oil marketer SOMO, added that Iraq’s market share had been compromised by the wars it has fought since the 1980s.

“We should be producing 9 million (barrels per day) if it wasn’t for the wars,” he said.

OPEC announced plans last month to reduce its output to between 32.5 million barrels per day (bpd) and 33 million bpd, from September’s 33.39 million bpd. The group will iron out the details of how it will hit the target at its next meeting in Vienna on Nov 30.

Gold

Gold rose on Monday as the dollar retreated from an earlier near ninemonth high, though uncertainty over the timing of a US interest rate hike kept prices hemmed in a range.

Signs of improving physical demand in major Asian consumers helped underpin the metal after it snapped three weeks of losses last week to rise 1.3 percent, analysts said.

Spot gold was at $1,271.11 an ounce by 1340 GMT, up 0.4 percent, while US gold futures for December delivery were down $4.30 an ounce at $1,272.00.

“The weaker US dollar certainly contributes to the price strength,” Commerzbank analyst Carsten Fritsch said. “The gold price already showed relative strength recently. It did not fall despite a stronger dollar and news of massive ETF outflows on Friday.”