Wall Street climbs with earnings in spotlight; dollar down vs yen

Most major European markets closed Easter Monday

NEW YORK, April 17, (Agencies): Tensions over North Korea pressured the dollar against the yen and lifted gold prices on Monday, while US stocks rose after three straight days of losses as investors shifted their focus to earnings.

North Korea had a failed missile test launch over the weekend, adding to regional tensions that have escalated in recent weeks as US President Donald Trump has taken a tough rhetorical line with Pyongyang.

“We are seeing once again a little bit of a flight to safety as a result of the news over the weekend of North Korea’s attempted missile test. That’s resulting in a little bit of a weakness in the US dollar,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The dollar fell to a five-month low against the safe-haven yen, while the US dollar index was down 0.4 percent. Gold gained 0.7 percent to hit a five-month high .

Most major European markets were closed for Easter Monday, while Wall Street reopened after being closed for the Good Friday holiday.

Data showing China’s economy grew more quickly than expected in the first quarter helped to offset some geopolitical worries.

First-quarter results from US companies will draw investors’ attention as reporting picks up this week. Shares of Netflix, due to report after the bell, were up 2.9 percent.

The Dow Jones Industrial Average was up 121.98 points, or 0.6 percent, to 20,575.23, the S&P 500 had gained 13.39 points, or 0.57 percent, to 2,342.34 and the Nasdaq Composite had added 34.37 points, or 0.59 percent, to 5,839.52.

“People want to be focused on earnings and how the economy is doing,” said Robert Pavlik, chief market strategist at Boston Private Wealth in New York.

“Financials should do well ... but they’ve given most of the gains back that they’ve seen since President Trump was elected.”

Financial shares rallied after the Nov. 8 election on hopes of deregulation under Trump and expectations of higher interest rates.

World stocks as measured by the MSCI world equity index rose 0.5 percent.

The United States, its allies and China are working together on a range of responses to North Korea’s latest failed ballistic missile test, Trump’s national security adviser said on Sunday, citing what he called an international consensus to act.

That dwarfed any relief for market players after the US Treasury did not name China as a currency manipulator, avoiding an all-out confrontation on currencies between the world’s two largest economies.

In a highly anticipated report on Friday, Trump’s administration declined to name any major trading partner as a currency manipulator, backing away from a key campaign promise to slap that label on China.

US bond prices were mostly flat. The 10-year US Treasury yield was at 2.23 percent.

Crude oil prices slipped following three straight weeks of gains, but the strong economic growth in China and a weaker dollar limited losses.

Benchmark Brent crude futures were down 43 cents at $55.46 a barrel, while US crude futures were down 45 cents at $52.73.

US

US stocks were on track to snap a three-day losing streak on Monday as investors turned their attention to the first-quarter earnings season, while geopolitical concerns took a back seat.

The latest earnings season is expected to show whether companies can live up to their lofty valuations, especially after a post-election rally.

Profits of S&P 500 companies are estimated to have risen 10.4 percent in the latest quarter, the first doubledigit percentage growth since the third quarter of 2014, according to Thomson Reuters I/B/E/S.

The influence of geopolitical risks, which had dominated market sentiment last week, seemed to be waning. President Donald Trump’s national security adviser, H.R. McMaster, said on Sunday the United States, its allies and China were working on a range of responses to North Korea’s latest failed ballistic missile test.

However, McMaster indicated that Trump was not considering military action for now.

“We got in and out of the long weekend without any major news or controversy on the geopolitical front,” said Art Hogan, chief market strategist at Wunderlich Equity Capital Markets in New York.

“The anticipation of better earnings from the first quarter may shift the momentum in the favor of this market at least in the near-term.”

At 12:47 pm ET (1647 GMT), the Dow Jones Industrial Average was up 112.67 points, or 0.55 percent, at 20,565.92, the S&P 500 was up 12.33 points, or 0.53 percent, at 2,341.28 and the Nasdaq Composite was up 32.46 points, or 0.56 percent, at 5,837.61.

All of the 11 major S&P 500 sectors were higher, led by technology, which was up for the first time in 11 days.

Among stocks, Amazon.com was up 1.3 percent at $896.79 after Credit Suisse raised its price target to $1050 from $900. The online retailer’s shares also provided the biggest boost to the S&P and the Nasdaq.

Credit Suisse also raised its price target on Boeing, sending the aircraft maker’s shares up 1.4 percent.

Netflix, which is scheduled to report results after the bell on Monday, was up 2.7 percent at $146.75.

Arconic was the biggest percentage gainer on the S&P after Chief Executive Klaus Kleinfeld resigned amid pressure from activist hedge fund Elliott Management.

Advancing issues outnumbered decliners on the NYSE by 1,996 to 881. On the Nasdaq, 1,816 issues rose and 960 fell.

The S&P 500 index showed seven 52-week highs and no lows, while the Nasdaq recorded 22 highs and 38 lows.

Asia

Asian markets moved cautiously Monday even as Chinese economic growth data beat expectations, with geopolitical concerns weighing on sentiment.

China’s economy grew 6.9 percent in the first quarter of 2017, government data showed, marking the second quarterly improvement since the final three months of 2014.

The reading was better than the median analyst expectation of 6.8 percent in an AFP poll, and up on the fourth quarter figure.

But tensions on the Korean peninsula continued to affect markets Monday as US Vice President Mike Pence warned North Korea not to test President Trump’s resolve during a visit to the heavily militarised border between the two Koreas.

Relations between Pyongyang and Washington have reached new lows in recent weeks as a series of North Korean weapons tests have prompted warnings from Trump’s administration.

Trump last week ordered a naval strike group led by the USS Carl Vinson aircraft carrier to the region, though the vessels remain a long way from the peninsula.

Shanghai fell 0.7 percent, Singapore dropped 0.8 percent while Manila and Jakarta were also down.

“China’s financial regulation coupled with geopolitical risks surrounding North Korea have heightened risk aversion and put pressure on stocks,” Ken Chen, an analyst at KGI Securities Co in Shanghai, told Bloomberg News.

But he added that “the downside should be limited as first-quarter figures showed economic fundamentals remained sound.”

Monday’s figures also showed China’s industrial output growth rose to 7.6 percent year-on-year in March, beating a Bloomberg estimate of 6.3.

The readings follow data showing robust foreign trade and a further expansion in factory activity driven by a pickup in production and demand last month.

Elsewhere, Hong Kong and Sydney were closed for a holiday, but Seoul rose 0.5 percent.

Tokyo’s benchmark Nikkei 225 index — which closed at a 2017 low on Friday — also snapped a four day losing streak to gain 0.1 percent.

Shoichiro Yamauchi, an equity market strategist at Nomura Securities, told Bloomberg that bargain buying helped drag the Japanese market out of the red.

“Japanese shares already declined over the possibility of military action over North Korea last week, and they’re fairly cheap,” Yamauchi said.

“Technical indicators are signalling shares are in oversold territory, and some investors appear to be short-covering.”

Jittery traders nonetheless continued to push into the yen, which is seen as a safe investment in times of turmoil or uncertainty.

In Tokyo, the dollar weakened to 108.37 yen from 108.91 yen in Asia on Friday. Oil also fell below $53 a barrel amid tensions in the Korean peninsula and on news of increased US drilling activity.

Key figures around 0730: Tokyo — Nikkei 225: UP 0.1 percent to 18,355.26 (close)

Hong Kong — Hang Seng: CLOSED

Shanghai — Composite: DOWN 0.7 percent to 3,222.17

Oil

Crude oil recouped earlier losses on Monday in subdued trading, but signs that the United States is continuing to add output largely counteracted strong economic growth in China and OPEC-led efforts to cut production.

Benchmark Brent crude futures were down 14 cents at $55.75 at 1350 GMT, after trading as much as 58 cents lower.

US West Texas Intermediate (WTI) crude futures were down 14 cents at $53.04 a barrel, after falling by as much as 55 cents earlier in the day.

Both benchmarks rose last week for a third consecutive week, and were trading close to 12 percent above their 2017 lows. Speculators in the week to April 11 also increased their bets on bullish performance in both contracts.