Equities edge up after tech-led sell-off; Canadian dollar soars

Oil slips as OPEC sees market rebalancing at slower pace

NEW YORK, June 13, (Agencies): World stock markets rose with bank shares and short-dated US bond yields hit multi-week peaks on Tuesday as investor focus turned to the Federal Reserve’s monetary policy meeting.

Technology shares also edged higher after a two-session sell-off that put the spotlight on areas of the stock market where valuations appear stretched.

The Fed, the US central bank, is widely expected to raise its benchmark interest rate on Wednesday and may also provide details on its plans to shrink $4.5 trillion of assets it amassed to nurse the economic recovery.

The Bank of Japan and the Bank of England also meet this week, although no major policy changes are expected.

The gap between benchmark US and European bond yields held near its widest in a month as the Fed meeting also shone a light on the slow pace of change in European Central Bank policy.

The Canadian dollar hit a two-month high after Bank of Canada Governor Stephen Poloz said the central bank’s 2015 rate cuts “have largely done their work,” signaling that it could raise rates sooner than previously thought.

A US dollar index was down 0.1 percent.

Big technology names like Microsoft and Alphabet helped prop up US stocks.

The Dow Jones Industrial Average was up 54.03 points, or 0.25 percent, to 21,289.7, the S&P 500 had gained 5.18 points, or 0.21 percent, to 2,434.57 and the Nasdaq Composite had added 25.29 points, or 0.41 percent, to 6,200.76.

The pan-European STOXX 600 was up 0.6 percent.

Oil prices edged higher, reversing earlier losses.

Brent crude futures were up 0.3 percent at $48.42 per barrel, while benchmark US crude was up 0.1 percent at $46.12.

US

US stocks rose on Tuesday, with the Dow hitting an all-time high as bank and technology shares gained.

The S&P 500 technology sector rose 0.71 percent, recovering from its biggest two-day decline in nearly a year on Monday, and topped the list of gainers among the 11 major S&P indexes.

Shares of Microsoft, Alphabet and Apple , which were hit hard by the rout, powered the technology index on Tuesday.Investors are also likely to stay away from making big bets ahead of a near-certain interest rate hike from the Federal Reserve.

Traders have priced in a 94 percent chance of the Fed raising rates after its two-day meeting that starts on Tuesday. Investors are also looking for more details on the central bank’s plans to trim its $4.5 trillion balance sheet.

The Fed is expected to release its decision at 2:00 pm ET (1800 GMT) on Wednesday followed by a press conference by Fed Chair Janet Yellen.

At 12:41 pm ET (1641 GMT), the Dow was up 84.08 points, or 0.4 percent, at 21,319.75, the S&P 500 was up 8.55 points, or 0.35 percent, at 2,437.94 and the Nasdaq Composite was up 37.33 points, or 0.6 percent, at 6,212.80.

Six of the 11 major S&P sectors were higher, while defensive plays like utilities, telecom services and consumer staples were lower.

Financials rose 0.51 percent, helped by gains in big banks after the US Treasury Department announced a plan to make sweeping changes to banking regulations on Monday.

Amazon.com rose 0.7 percent, after recording losses for the past two days, and gave the biggest boost to the consumer discretionary index.

Restaurant chain operator Cheesecake Factory was down nearly 10 percent at $52.61 after it warned of a decline in comparable store sales in the current quarter.

Tesla was up 2.5 percent at $368.17 after Berenberg raised its rating on the stock to “buy” from “hold”.

Advancing issues outnumbered decliners on the NYSE by 1,847 to 993. On the Nasdaq, 1,731 issues rose and 1,060 fell.

Europe

A recovery in tech stocks and fresh optimism over troubled Italians banks lifted European shares from sevenweek lows on Tuesday. Capita led the gains after offering a reassuring outlook.

The pan-European STOXX 600 index ended up 0.6 percent, almost fully recovering losses from the previous session. Italy’s benchmark rose 0.9 percent.

Tech stocks rose more than 1 percent after Monday’s sell-off, when concern over valuations at US companies spilled over to Europe, particularly companies supplying Apple.

Dialog Semiconductor, Infineon and ASM International were among the tech stocks gaining the most, rising 1.2 to 4.7 percent.

Italian banks were another bright spot, gaining 1.1 percent amid renewed hopes for a rescue of struggling Veneto banks. Italy’s economy minister said a solution was “close” .

UBI Banca and BPER Banca led European banks, rising 3.4 percent and 2.5 percent respectively. UniCredit gained 1.6 percent. Receding election worries also helped.

“It’s quite evident that the authorities are not too keen to let any institutions really, really fail ... there’s always a lastminute deal done for them,” Charles Hanover Investments’ Roy said. He sees value in Italy and Spain over the next 18 to 24 months.

Among individual stocks, shares in troubled British outsourcing firm Capita jumped 15 percent after the group said it hoped to improve its profitability and secure more contract wins in the second half of 2017, following a series of profit warnings.

Visitor attractions group Merlin Entertainments fell around 2.6 percent, however, after giving a cautious outlook. Attacks in Manchester and London had hit domestic demand, it said.

Broker action propelled shares in London Stock Exchange Group 5.4 percent higher after Credit Suisse and RBC raised their target prices on the stock.

Greek shares rose 1.6 percent after officials said a compromise on debt may be reached on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later.

Asia

On equity markets, technology firms were unable to bounce back from the previous day’s sell-off that was sparked by a rout in the sector on Wall Street Friday.

Sony and Sharp were both down in Tokyo while Samsung was flat in Seoul after Monday’s tumble. However, Tencent and Lenovo were in positive territory in Hong Kong.

Broader Asian markets fared slightly better after Monday’s steep losses. Tokyo finished marginally lower but Shanghai closed up 0.4 percent and Hong Kong gained 0.6 percent.

Sydney gained 1.7 percent and Seoul jumped 0.7 percent, while Wellington and Taipei were also up.

Traders are now awaiting the end of the Federal Reserve’s latest policy meeting. While another interest rate rise is widely expected, the bank’s postmeeting statement will be scanned for some forward guidance and clues about future movements.

In early European trade London, Frankfurt and Paris each rose 0.3 percent. Key figures at around 0820 GMT Tokyo — Nikkei 225: Down 0.1 percent at 19,898.75 (close)

Hong Kong — Hang Seng: Up 0.6 percent at 25,852.10 (close)

Shanghai — Composite: Up 0.4 percent at 3,153.74 (close)

Dollar/yen: Up at 110.20 yen from 109.93 yen

Oil

Oil prices edged down on Tuesday after OPEC reported an increase in its production for May despite a supply cut agreement and said the oil market was rebalancing more slowly than expected.

Benchmark Brent crude was 17 cents lower at $48.12 per barrel by 1236 GMT, reversing gains made earlier in the session when it edged up to $48.67. US light crude was at $45.86 per barrel, down 22 cents.

Prices initially nudged higher after the world’s top exporter Saudi Arabia outlined cuts to customers in July that included a reduction of 300,000 barrels per day (bpd) to Asia.

Riyadh is leading an effort by the Organization of the Petroleum Exporting Countries, Russia and other producers to cut output by almost 1.8 million bpd until March in a bid to curb oversupply and prop up prices.

But OPEC’s monthly report showed output from the group rose by 336,000 bpd in May to 32.14 million bpd, led by a recovery in Nigeria and Libya which are exempt from supply cuts. The report said the market was rebalancing at a “slower pace”.

“Crude oil is still struggling to rebound,” said Olivier Jakob, strategist at Petromatrix, adding that OPEC’s gradual approach to rebalancing was giving US producers time to drill new wells that were undermining the impact of the group’s cuts.

He said Saudi cuts had to continue beyond the northern hemisphere’s summer months to have a significant impact

“They’re making a lot of headlines about reducing supplies but that’s also right in their seasonal pattern of lowering exports in July, August because of domestic needs,” he said.

Trade data show OPEC shipments to customers averaged around 26 million bpd in the last six months of 2016 and are set to average around 25.3 million bpd in the first half of this year.

Gold

Gold dipped on Tuesday on technical selling, although losses were limited as most investors stayed on the sidelines ahead of a US Federal Reserve meeting that should provide signals on the pace of future monetary tightening.

The Fed is widely expected to raise interest rates when it concludes its meeting on Wednesday, although investors will focus on any new hints on the pace of hikes this year and its assessment of the economy and inflation.

“Obviously ahead of the meeting people aren’t building significant positions ... If anything, they’re expecting a dovish Fed because recent (US) economic data has been weak,” said Fawad Razaqzada, analyst at FOREX.com.

A lower-than-expected pace of rate hikes would weigh on the dollar, making dollar-priced gold cheaper for nonUS investors.

Spot gold dipped 0.3 percent to $1,261.88 per ounce at 1229 GMT, extending losses into a fifth session, after hitting a session low of $1,259.16, its weakest since June 2.

US gold futures for August delivery dropped 0.4 percent to $1,264.10.

The US dollar slipped ahead of the Fed meeting, with investors also awaiting details from the Fed on its plans to shrink $4.5 trillion dollars of assets it amassed to nurse the economic recovery.

“There have been no major developments recently to give the safe-haven metal additional support. This has allowed the shorter-term futures traders to put downside pressure on the market via profit taking,” said KITCO Metals Inc in a note.