Equities hit record high as Irma weakens; dollar gains vs majors

Oil prices retreat, gold dips

NEW YORK, Sept 11, (Agencies): A global equity index surged to a record high and the dollar gained on Monday, spurred by relief that Hurricane Irma weakened to a tropical storm and that North Korea’s anniversary celebrations on the weekend passed without a new missile test.

Gold prices fell as did the price of benchmark German and US Treasury debt as demand slipped for safe-haven assets and investors took on more risk after North Korea marked its founding on Saturday without new provocations.

Ranked as one of the most powerful hurricanes ever recorded in the Atlantic, Irma hit a wide swath of Florida on Sunday before being downgraded to a tropical storm. While heavy flooding swamped Miami and other cities, the state’s largest city was spared the brunt of the storm.

MSCI’s all country world stock index, which tracks 2,400 stocks in 47 countries, climbed to its latest peak as Europe’s insurers rose more than 2 percent on hopes Irma’s damage would not prove as costly as feared.

Shares on Wall Street jumped about 1 percent, with the benchmark S&P 500 index less than half a percentage point away from record territory.

The pan-European FTSEurofirst 300 index rose 0.98 percent and MSCI’s gauge of global stocks gained 0.74 percent.

The relief over North Korea and a weaker yen helped give the stock market in Tokyo its best session since June.

Investors are so focused on the hurricane’s fallout and the Federal Reserve’s potential tightening that they’re missing the enormous boost the weaker dollar and low interest rates will give the US economy, said Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis.

The dollar index, which tracks the greenback against a basket of six major currencies, was 0.38 percent higher at 91.697.

The index had hit a more than 2-1/2-year low of 91.011 on Friday as investors fretted about the short-term impact of Irma on the US economy and simmering tensions with North Korea.

The euro fell 0.48 percent to $1.1975 against the greenback, while the Japanese yen weakened 1.07 percent at 108.99 per dollar.

Oil prices fell on concerns that Irma’s pounding of Florida could dent oil demand in the world’s top oil-consuming nation.

Losses were capped by weekend talks between Saudi Arabia’s energy minister and counterparts over a possible extension to a pact to cut global oil supplies beyond next March.

Brent crude oil futures for November delivery were down 66 cents at $53.12 a barrel, while benchmark US West Texas Intermediate crude declined by 33 cents to $47.15.

US

Three major US indexes rose more than 1 percent on Monday as Irma’s downgrade to a tropical storm eased concerns about its impact on economic growth, and as North Korea refrained from any missile tests over the weekend, as feared.

All the 11 major S&P sectors were higher, led by gains in technology and financial stocks, with insurers advancing as Irma’s fury petered out.

At 12:32 pm ET (1632 GMT), the Dow Jones Industrial Average was up 247.18 points, or 1.13 percent, at 22,044.97 and the S&P 500 was up 25.11 points, or 1.02 percent, at 2,486.54.

The Nasdaq Composite was up 68.80 points, or 1.08 percent, at 6,428.99.

World stocks climbed to a record high and the dollar gained, while gold retreated from Friday’s 13-month high.

The CBOE volatility index, a widely followed measure of market anxiety, fell more than 12 percent to 10.80, on track for its biggest percentage decline since Aug 22.

The financial sector was up 1.69 percent. Goldman Sachs’ 1.8 percent rise led the Dow higher, followed by insurer Travelers, which rose 2.94 percent.

Other insurers, especially the ones with exposure to Florida, also gained. Universal Insurance Holdings and HCI Group surged more than 15 percent, while Heritage Insurance soared 23 percent.

The technology sector jumped 1.46 percent. Apple rose nearly 2 percent a day ahead of the launch of the new iPhone, providing the biggest boost to the Nasdaq and S&P.

UK

Britain’s top share index closed higher on Monday, boosted by financial stocks which surfed an insurance rally across Europe and the United States as estimates of the cost of Hurricane Irma dropped.

The blue chip FTSE 100 index was up 0.6 percent at 7,413.59 points, while mid caps gained 0.4 percent.

The FTSE 350 non-life insurance index jumped 2.1 percent, leaving it on track for its biggest one-day gain since April, with shares in Lancashire Holdings, Beazley, Esure and Hiscox all rising between 2.9 percent to 10.3 percent.

Provident was the top gainer with a 3.8 percent rise as other British financial shares rose in line with Europe and Wall Street after Hurricane Irma weakened to a Category 1 storm.

In other sectors, AstraZeneca’s shares were among the biggest gainers on the FTSE, rising 2.1 percent after reassuring results from two of its lung cancer drugs.

The pharma firm’s shares are yet to recover from a 15 percent plunge in July, when initial results from its advanced lung cancer study, known as Mystic, failed.

“(AstraZeneca) now has a good chance of growing the opportunity from what was previously expected in Stage III lung cancer,” analysts at Liberum said in a note.

Europe

Stock markets rallied on Monday on receding concerns over North Korea and Hurricane Irma, analysts said.

After a robust start in Asian trading, equities moved higher in Europe and then on Wall Street.

European equities then took the baton, with both Frankfurt and Paris posting gains of more than 1.0 percent. London added 0.5 percent.

Key figures around 1530 GMT: London — FTSE 100: UP 0.5 percent at 7,413.59 points (close)

Frankfurt — DAX 30: UP 1.4 percent at 12,475.24 (close)

Paris — CAC 40: UP 1.2 percent at 5,176.71 (close)

EURO STOXX 50: UP 1.3 percent at 3,491.83

Euro/dollar: DOWN at $1.1979 from $1.2030 at 2115 GMT on Friday

Pound/dollar: DOWN at $1.3179 from $1.3196

Asia

Asian markets kicked off the week with gains on Monday as concerns over North Korea eased and a killer hurricane struck Florida with less force than feared.

On equity markets the weaker yen helped Japan’s Nikkei end the day 1.4 percent higher, while Hong Kong jumped one percent and Shanghai closed up 0.3 percent.

Sydney piled on 0.7 percent, with Seoul 0.7 percent higher and Singapore 0.1 percent up. There were also gains for Bangkok and Manila.

“Investors who had sold equities on wariness over a possible missile launch from North Korea are unwinding their positions for now,” Hiroyasu Iida, head of the investment research center at Aizawa Securities, told Bloomberg News.

Key figures around 0820 GMT: Tokyo — Nikkei 225: UP 1.4 percent at 19,545.77 (close)

Hong Kong — Hang Seng: UP 1.0 percent at 27,955.13 (close)

Shanghai — Composite: UP 0.3 percent at 3,376.42 (close)

Dollar/yen: UP at 108.57 yen from 107.83 yen

Oil

Oil prices dropped on Monday on concerns that Hurricane Irma’s pounding of heavily populated areas of Florida could dent oil demand in the world’s top oil-consuming nation.

Losses were capped by weekend talks between Saudi Arabia’s energy minister and counterparts over a possible extension to a pact to cut global oil supplies beyond next March.

Brent crude oil futures for November delivery were down 66 cents at $53.12 a barrel while benchmark US West Texas Intermediate crude declined by 33 cents to $47.15.

Irma knocked out power to nearly 5.8 million Florida homes and businesses on Sunday after millions were told to evacuate ahead of the storm.

“We believe that Irma will have a negative impact on oil demand but not on oil production or processing,” Goldman Sachs analysts said in a note.

Irma hit Florida on Sunday morning as a dangerous Category 4 hurricane. It gradually lost strength and weakened to a tropical storm by Monday morning as it headed towards Georgia.

It comes on the heels of Hurricane Harvey, which struck the US oil hub of Texas two weeks ago, knocking out a quarter of the nation’s refineries, many of which are now restarting operations.

The two hurricanes are expected to inflict a “bearish shock” on oil balances in September, denting global demand by 900,000 barrels per day (bpd) and supply by about 300,000 bpd, Goldman said.

Gold

Gold prices fell on Monday from the previous session’s 13-month high as relief that North Korea did not conduct a missile test over the weekend helped to lift global stocks, the US dollar and bond yields.

Demand for safer assets, including gold, also weakened after storm Irma wreaked less damage than feared in Florida. Spot gold was down 0.9 percent at $1,334.86 an ounce by 1353 GMT, on track for its biggest one-day drop since July 7.

On Friday it touched $1,357.54, the highest since August last year.

US gold futures for December delivery were down 0.9 percent at $1,339.20.

Gold had been lifted last week by fears of a North Korean missile launch and the impact of Irma on the US economy, helping to drive the dollar to its weakest since January 2015 and US bond yields to 10-month lows.

“Both of these events failed to materialise in a major way,” said Saxo Bank analyst Ole Hansen. “The shortterm stage has been set for some consolidation (in gold prices). Much depends on where the dollar and bonds decide to go.”

A stronger dollar makes gold more expensive for holders of other currencies, potentially reducing demand, while higher bond yields increase the opportunity cost of non-yielding bullion.

Uncertainty over North Korea is likely to keep demand for gold high, preventing significant price falls, Commerzbank analysts said in a note.