Global stocks, greenback edge higher ahead of Trump-Xi meet

Crude rises despite bearish inventory data

NEW YORK, April 6, (RTRS): Global equity markets and the dollar edged higher on Thursday, helped by fresh data showing a tighter US labor market, as investors stayed cautious before the first meeting between US President Donald Trump and his Chinese counterpart Xi Jinping.

Key stock indexes in Europe and on Wall Street climbed but a gauge of global equities was little changed, with gains offset by a decline in emerging markets.

The dollar index extended gains after data showed new applications last week for US unemployment benefits recorded their biggest drop in nearly two years.

Last week’s jobless claims data, however, has little bearing on the March employment report due out on Friday. Claims rose during the survey week for nonfarm payrolls last month, suggesting some moderation in the pace of job growth.

“The market will be very remiss to do anything too sharp at this point, given that we have payrolls coming up,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

The dollar index rose 0.1 percent, with the euro down 0.11 percent at $1.065. The Japanese yen eased 0.27 percent versus the greenback at 111.03 per dollar.

Trump faces pressure to deliver trade concessions with China for some of his most fervent supporters and to prevent a crisis with North Korea from spiraling out of control. However, White House officials have set expectations low for the meeting.

On Wall Street, the Dow Jones Industrial Average rose 54.07 points, or 0.26 percent, to 20,702.22. The S&P 500 gained 7.27 points, or 0.31 percent, to 2,360.22 and the Nasdaq Composite added 19.07 points, or 0.33 percent, to 5,883.55.

The pan-European FTSEurofirst 300 index closed up 0.20 percent to a provisional 1,500.65, while MSCI’s gauge of stocks across the globe fell 0.01 percent.

Oil prices rose nearly 1 percent, on track for a fourth straight day of gains, but analysts warned record high US inventories could derail the rally.

US crude rose 42 cents to $51.57 a barrel and Brent was last at $54.71, up 35 cents on the day.

US Energy Department data shows crude inventories at record levels, saying speculative buying is starting to reach dangerous levels from a technical perspective.

Gold edged lower, pressured by a firmer dollar, while copper also fell.

US gold futures gained 0.36 percent to $1,253.00 an ounce. Copper lost 0.65 percent to $5,856.50 a tonne.

US

US stocks rose on Thursday, led by energy companies and a rebound in financials, but gains were kept in check by cautious trading ahead of the Trump-Xi meeting and on uncertainty about quick US fiscal stimulus.

President Donald Trump and his Chinese counterpart, Xi Jinping, start their two-day meeting later in the day, and top of the agenda is the possibility of Trump using US-China trade ties to pressure Beijing to do more to rein in North Korea’s arms program.

“The market can still go higher, but they need to make sure that everything the market has gone up on so far is coming to pass,” said Neil Massa, senior equity trader at Manulife Asset Management in Boston.

“And that means making sure Republicans are able to do the pro-business agenda that they put out there.”

At 12:35 p.m. ET (1635 GMT), the Dow Jones Industrial Average was up 47.17 points, or 0.23 percent, at 20,695.32, the S&P 500 was up 5.86 points, or 0.25 percent, at 2,358.81 and the Nasdaq Composite was up 14.58 points, or 0.25 percent, at 5,879.06.

Nine of the 11 major S&P sectors were higher, led by the energy index’s 0.8 percent rise following higher oil prices.

But the biggest boost was from financials. The index was up 0.57 percent after a four-day losing streak.

“The markets still look strong but they are massively overbought and we do have bank earnings beginning to come in next week. That will tell the real tale for the sector,” said Phil Davis, chief executive of PSW Investments.

As corporate earnings reports start trickling in, investors are also cautious given the lofty valuations. The S&P 500 index is trading at about 18 times forward earnings estimates, above its long-term average of 15.

L Brands jumped 10.4 percent after reporting a smaller-than-expected drop in March sales.

Among the laggards was Amazon, which fell about 1 percent, set for its first drop after eight sessions, in six of which it hit record highs.

AMD sank nearly 8 percent after Goldman Sachs started overage with a “sell” rating.

Advancing issues outnumbered decliners on the NYSE by 2,045 to 767. On the Nasdaq, 1,727 issues rose and 1,004 fell.

The S&P 500 index showed five 52week highs and four lows, while the Nasdaq recorded 22 new highs and 55 new lows.

UK

British shares dropped on Thursday after minutes of the Federal Reserve’s last meeting indicated the bank would shrink its balance sheet later this year.

The FTSE 100 was down 0.4 percent at 7,303.20 points at its close, with financials the biggest drag, taking almost 11 points off the index. US equities had dipped on Wednesday .

“There were two elements in the Fed minutes: the fact that some officials thought equities were overvalued; but the smarter money is looking at the fact balance sheet reduction seems to be indicated towards the end of this year,” said Panmure Gordon chief economist Simon French.

Lloyds, which traded ex-div, was among the biggest fallers, down 2.2 percent, while Barclays fell 1 percent.,

Pearson was down 6.7 percent, also ex-div and further weighed by a downgrade from Exane to ‘underperform’.

The FTSE 100 was also under pressure from a firmer sterling, as a large number of FTSE constituents are dollar-earning firms. April is the month when UK companies make big dividend payouts, and is one reason why the pound has traditionally risen then.

China

China stocks extended gains on Thursday to hit 4-month highs as investors continued to chase stocks which could benefit from the government’s launch of a massive new economic zone near Beijing.

The blue-chip CSI300 index rose 0.3 percent to 3,514.05 points, while the Shanghai Composite Index added 0.4 percent to 3,281.00.

Most of the market’s attention was focused on the new Xiongan special zone, described as “a thousand-year project”, with dozens of stocks related to the plan surging the maximum allowed 10 percent trade limit for the second session in a row.

Many domestic brokerage firms expect the initiative to become a strong investment theme in coming months, given the prominence of the plan.

In particular, infrastructure stocks are widely seen benefiting from the development of the special zone, which would be modelled on the Shenzhen Special Economic Zone that helped kickstart China’s economic reforms in 1980.

An index tracking major infrastructure players advanced 2.3 percent to a 15-month high, after registering best day in four months the previous session.

Infrastructure giants China State Construction Engineering leaped 6 percent, China Railway Group jumped 5 percent, while China Railway Construction Corp ended up 3.5 percent.

Investors were also looking to President Donald Trump’s first face-to-face meeting with Chinese President Xi Jinping later this week, with trade and security issues set to figure prominently in the talks.

The market was largely unfazed by a private survey which showed activity in China’s service sector expanded at its weakest pace in six months in March, hurt by slower growth in new orders and intensifying cost pressures.

Hong Kong stocks fell on Thursday in sympathy with Asia markets, as investors fretted about signs the Federal Reserve could scale back its massive stimulus this year amid frayed nerves ahead of a looming meeting between the US and Chinese presidents.

The benchmark Hang Seng index dropped 0.5 percent at the close, to 24,273.72 points, while the Hong Kong China Enterprises Index lost 0.9 percent, to 10,276.41 points.

Oil

Oil prices rose on Thursday, on track for a fourth consecutive daily gain, after recovering from losses triggered by record high US crude inventories.

Brent crude futures were up by 20 cents on the day at $54.56 a barrel by 1100 GMT, while US West Texas Intermediate (WTI) crude futures were up 13 cents at $51.28 a barrel.

The US Energy Information Administration (EIA) reported an increase of 1.57 million barrels in crude inventories late on Wednesday, bringing total US stocks to a record high of 535.5 million barrels.

The record crude inventories came as US oil production rose by 52,000 barrels per day (bpd) to 9.2 million bpd .

Because of the glut, US crude exports have risen to a record 1.1 million bpd. Most cargoes are going to Asia, where traders say there are early signs of a tightening market due to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output in an effort to prop up prices.

Gold

Gold edged lower on Thursday, pressured by a firmer dollar on the back of upbeat US unemployment data and as some investors sold to redeem profits after bullion’s recent advance.

Spot gold fell 0.2 percent to $1,252.34 per ounce by 1140 GMT, retreating from an overnight peak of $1,258.96.

US gold futures were up 0.5 percent at $1,254.40, after climbing as much as 1 percent to $1,260.80 earlier in the day.

“The slight uptick in the dollar and some profit taking after the move late yesterday is probably bringing in that bit of weakness,” said Jonathan Butler, commodities analyst at Mitsubishi in London.

The dollar index extended gains after data showed new applications last week for US unemployment benefits recorded their biggest drop in nearly two years.

Those claims, however, will have no bearing on March US non-farm payrolls data on Friday, which analysts say could be key for short-term direction of the gold market.