Equities set fresh high as Irma, N. Korea fears ebb; dollar steady

Oil edges higher as OPEC output falls

The S&P 500 and a gauge of global equity markets hit new highs on Tuesday as the feared impact of Hurricane Irma waned and the easing of tensions with North Korea helped drive a sell-off in global bond markets.

The US dollar clung to its gains, helped by the bounce in government debt yields and ahead of US inflation data that could influence the timing of the next Federal Reserve interest rate hike.

European shares rose to a fiveweek high, extending the relief bounce seen in the previous session and Wall Street advanced, led by gains in financial and industrial stocks.

MSCI’s all country world stock index, which tracks more than 2,400 stocks in 47 countries, rose 0.26 percent after it jumped 0.9 percent on Monday, its fourth-biggest gain so far this year.

Investors also welcomed US Treasury Secretary Steve Mnuchin’s comments that he was hopeful for tax reform by year’s end with a “competitive” rate for businesses, even if not at the 15 percent bracket backed by President Donald Trump, he said.

The greenback found support as investors further unwound bearish bets against it. The dollar index, which tracks the currency against a basket of six major rivals, rose 0.04 percent while the euro rose 0.09 percent to $1.1962.

The Japanese yen weakened 0.62 percent versus the greenback at 110.10 per dollar.

Oil prices rose almost 1 percent after OPEC said its output fell in August and forecast higher demand in 2018, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut.

The Organization of the Petroleum Exporting Countries also said the two hurricanes that have hit the United States in recent weeks would have a “negligible” impact on demand.

US crude rose 0.42 percent to $48.27 per barrel and Brent was last at $54.22, up 0.71 percent on the day.

US

US stocks were higher in early afternoon trading on Tuesday, with the S&P 500 hitting a record intraday high led by gains in financial stocks, and investors focused on an Apple event where the company is set to launch its new iPhone.

Concerns around the severity of Hurricane Irma’s financial impact receded as it weakened to a tropical depression, while investors shrugged off fresh developments related to North Korea.

Apple’s shares inched 0.3 percent higher as the event to launch the 10th anniversary edition of the iPhone kicked off.

At 12:35 pm ET (1635 GMT), the Dow Jones Industrial Average was up 65.95 points, or 0.3 percent, at 22,123.32 and the S&P 500 was up 6.58 points, or 0.26 percent, at 2,494.69.

The Nasdaq Composite was up 13.24 points, or 0.21 percent, at 6,445.50.

Eight of the 11 major S&P sectors were higher, led by a 1.4 percent rise in telecom services index.

Financials rose more than 1 percent, with the six major banks up between 1.5 percent and 2.6 percent, after Goldman Sachs unveiled a growth plan that could add as much as $5 billion in revenue annually.

McDonald’s shares fell more than 3 percent on a report that a research firm had raised concerns about the restaurant chain’s third-quarter sales.

DowDuPont rose 1.77 percent after the company said it was making changes to a plan of splitting itself into three.

Advancing issues outnumbered decliners on the NYSE by 1,829 to 948. On the Nasdaq, 1,775 issues rose and 1,026 fell.

Europe

European shares rose to a fiveweek high on Tuesday, extending the relief bounce seen in the previous session as worries about Hurricane Irma and North Korea’s nuclear standoff eased.

All major trading centres and most sectors ended in positive territory as the pan-European STOXX 600 gained 0.55 percent, although some investors questioned how sustainable current markets levels are.

“Whether that equity reaction is Panglossian complacency or a sign of wonderful underlying fundamentals remains open to question,” ING wrote, adding that “even Category 5 storms can now be added to the list of things that ‘Don’t Really Matter’”.

Financial stocks were yet again among the top performers, with banks and financial services up 1.6 and 1.1 percent respectively.

Insurance firms, which fuelled Europe’s rise on Monday with a roughly 2 percent jump, were again in positive territory, edging up 0.8 percent.

“The structure of today’s open is typically ‘risk-on’,” said Pierre Martin, a senior sales trader at Saxo Bank, noting that the positive trend for banking stocks or automobile shares showed investors’ moods were off geopolitical and climate worries and back to more positive corporate and macroeconomic news.

Volkswagen rose 1.9 percent after announcing a 20 billion euro plan to develop zero-emission vehicles and other constructors were also gaining ground, such as Peugeot which topped France’s blue chip CAC 40 index with a 3.8 percent rise.

Novartis gained 1.3 percent as it reported that its biosimilar rituximab to treat blood cancers and immunological diseases such as rheumatoid arthritis was accepted for review by the US Food and Drug Administration (FDA).

Among losers, French veterinarian pharmaceutical company Virbac sank 16.3 percent after cutting its full-year outlook.

British home builders were also under pressure with Taylor Wimpey losing 1.4 percent and Barrat Development 1.7 percent after a report highlighted risks to the sector, a trader said.

Asia

Tokyo led gains across Asian markets Tuesday, tracking a record on Wall Street as the North Korea crisis eased and dealers breathed a sigh of relief that Hurricane Irma caused less damage to Florida than feared.

The UN Security Council voted unanimously Monday to step up sanctions against North Korea, having won the crucial support of Russia and China, while the US held out hope for a peaceful resolution to the crisis.

Most of Asia followed New York’s example, with a sharply weaker yen a plus for Japan’s exporters. The dollar was at 109.56 yen compared with the 10-month lows around 107.30 yen last week.

The Nikkei ended up 1.2 percent — a one month high — while Shanghai added 0.1 percent and Sydney gained 0.6 percent. Seoul ticked up 0.3 percent while Taipei and Singapore were also higher. Manila was closed owing to flooding from a major storm.

Hong Kong added 0.1 percent following strong gains over the previous two sessions.

China’s yuan retreated for the first time in two weeks after the central bank relaxed capital controls put in place earlier this year to prevent a flight of cash from the country. The currency was at 6.5277 to the dollar, against 6.4436 late last week.

Key figures around 0820 GMT Tokyo — Nikkei 225: Up 1.2 percent at 19,776.62 (close)

Hong Kong — Hang Seng: Up 0.1 percent at 27,972.24 (close)

Shanghai — Composite: Up 0.1 percent at 3,379.49 (close)

Dollar/yen: Up at 109.56 yen from 109.47 yen

Oil

Oil prices recouped some losses on Tuesday, helped by OPEC saying its output fell in August, an indication that the production-cutting pact was helping to reduce a supply gut.

In its monthly report the Organization of the Petroleum Exporting Countries also raised its demand forecast for 2018, and said the two hurricanes that have hit the United States in recent weeks would have a “negligible” impact on demand.

The market is assessing Hurricane Irma’s effect on demand, even as refinery restarts in the wake of Hurricane Harvey boosted crude oil consumption expectations.

International benchmark Brent crude edged 30 cents higher to $54.14 per barrel by 1235 GMT. Earlier in the day it traded as low as $53.42.

US West Texas Intermediate (WTI) was flat from the previous close at $48.07 a barrel. It had traded down to $47.73.

OPEC oil output by its 14 member countries fell in August by 79,000 barrels per day (bpd) from July to 32.76 million bpd, below a demand forecast.

OPEC Secretary-General Mohammed Barkindo said on Monday a deal to cut supply would help the market rebalance and strong demand could further reduce oil inventories.

OPEC said inventories were falling and that an increase in the price of Brent crude for immediate delivery to a premium to that for later supplies raised hopes that a rebalancing is under way.

Gold

Gold fell to its lowest in more than a week on Tuesday as easing concerns over North Korea’s nuclear ambitions and the impact of Hurricane Irma tempered demand for the metal as a haven from risk while the dollar strengthened.

World equities hit record highs for a second straight day as investors opted for nominally higher-risk assets over havens such as gold, bonds and the Japanese yen.

Spot gold hit its lowest since Sept 1 at $1,322.15 an ounce in early trade and was at $1,324.47 by 1400 GMT, down 0.2 percent. On Monday, it slid 1.4 percent in its biggest one-day drop in two months.

“The North Korea story has had (an impact) on the price of gold, but these geopolitical events tend to be quite limited in time,” Natixis analyst Bernard Dahdah said. “The market accommodates surprisingly quickly when things calm down.”

“It was the weakness of the dollar that was really driving gold, and the tensions with North Korea,” he said. “The rate at which the dollar can still depreciate is slowing down.”

US gold futures were down 0.3 percent at $1,331.80.

The dollar inched up 0.1 percent, extending the previous session’s bounce from last week’s 2-1/2-year low. European stocks rose, and world shares hit another record high.