Global equities edge up, dollar weakens as focus on Fed grows

Oil near five-month high; gold rises

NEW YORK, Sept 19, (Agencies): Global stock markets edged higher on Tuesday and the dollar dipped as investors waited for signals from the US Federal Reserve on when it will hike interest rates again and start shrinking its balance sheet.

Wall Street stocks gained slightly, with the Dow climbing to a fresh record after the open, while an index of stocks across the globe also inched higher. Tokyo’s Nikkei surged 2 percent overnight. Elsewhere, stocks took a breather.

The US central bank, which begins its two-day meeting on Tuesday, is widely expected to announce on Wednesday that it will begin paring its bond holdings, with reductions likely to start in the coming months.

Investors will also be watching for signals that the Fed will raise rates in December, and for any clues on personnel changes as the end of Fed Chair Janet Yellen’s term approaches and after the resignation of Vice Chair Stanley Fischer earlier this month. The dollar index fell 0.12 percent. The dollar had stayed weak following US data showing domestic home construction fell for a second straight month in August, rekindling some concerns about the US housing sector.

The Dow Jones industrial average rose 26.82 points, or 0.12 percent, to 22,358.17, the S&P 500 gained 0.89 points, or 0.04 percent, to 2,504.76 and the Nasdaq Composite added 0.33 points, or 0.01 percent, to 6,454.97.

The S&P 500 and Dow had both hit new peaks on Monday despite some late pressure on big tech stocks.

The pan-European FTSEurofirst 300 index rose 0.08 percent and MSCI’s gauge of stocks across the globe gained 0.15 percent.

In the US bond market, prices were little changed. Benchmark 10year notes last fell 2/32 in price to yield 2.2375 percent, from 2.23 percent late on Monday.

In commodity markets, oil prices edged lower. US crude fell 0.2 percent to $49.81 per barrel and Brent was last at $55.11, down 0.25 percent on the day.

US

US stocks edged up in early afternoon trading on Tuesday, helped largely by gains in telecom stocks, but traded in a narrow range as investors stayed away from making major bets ahead of the Federal Reserve’s policy meeting.

The US central bank, which begins its two-day meeting on Tuesday, is widely expected to announce on Wednesday that it will begin paring its bond holdings, with reductions likely to start in the coming months.

At 12:33 pm ET (1633 GMT), the Dow Jones Industrial Average was up 44.65 points, or 0.2 percent, at 22,376, the S&P 500 was up 3.79 points, or 0.15 percent, at 2,507.66 and the Nasdaq Composite was up 9.73 points, or 0.15 percent, at 6,464.37.

Seven of the 11 major S&P sectors were higher, led by a 2.14 percent gain in the telecom services sector.

Shares of wireless carriers T-Mobile rose 4.4 percent and Sprint 8.6 percent, following a report that the companies were in active merger talks.

Verizon and AT&T also rose more than 2 percent, lifting the S&P higher.

Health index was the biggest laggard on the S&P, pulled lower by United Health’s 2.2 percent fall.

Best Buy fell more than 8 percent after the No.1 US electronics retailer forecast 2021 adjusted earnings well below Wall Street estimates. The stock was the biggest loser on the consumer discretionary index

Tesla was down more than 2.3 percent after Jefferies started coverage of the electric car maker’s stock with “underperform”.

Advancing issues outnumbered decliners on the NYSE by 1,395 to 1,365. On the Nasdaq, 1,401 issues rose and 1,381 fell.

Europe

Dealmaking talk lifted European telecom stocks on Tuesday, helping the unloved sector stand out in an otherwise quiet session, where investors were waiting for the outcome of a Federal Reserve meeting.

The pan-European STOXX 600 index ended flat as traders awaited clues from the Fed about plans to start unwinding its $4.2-trillion portfolio of Treasuries and mortgagebacked securities.

But telecoms stocks rose as much as 0.9 percent to their highest level in nearly four weeks after CNBC reported that US wireless carriers TMobile US Inc and Sprint Corp were in active merger talks.

Deutsche Telekom, which controls T-Mobile US, was the biggest gainer, up more than 3 percent, but other stocks in the sector were also boosted by the report.

A trader at a European bank said Deutsche Telekom was the “obvious beneficiary” of any T-Mobile USSprint talks even though any combination would face serious anti-trust hurdles.

European telecoms stocks have underperformed the broader market in the past two years but valuations and earnings potential have started to fuel investors’ interest.

Deutsche Bank analysts led by Robert Grindle said this week a recovery of telecom stocks was long overdue and recommended that investors take positions as any rally could be swift.

Their top picks in the sector included Telenet, Telefonica, Vodafone and KPN.

Still on the M&A front, Eurofins got a boost from the acquisition of EAG Laboratories in North America. It was up more than 6 percent, making it the biggest gainer on the STOXX.

Solvay fell 1.4 percent but stayed close to its 2015 highs after news of the 1.6 billion-euro sale of its polyamides business to BASF.

Clariant fell 0.5 percent as news emerged the hedge funds fighting the Swiss chemical firm’s planned $20 billion merger with Huntsman Corp built a 15.1 percent stake.

Elsewhere, Heineken fell 4.4 percent after Mexican bottler and retailer Femsa sold a 2.5 billion-euro stake in the world’s second largest brewer.

Ocado declined 1.9 percent after the British online grocer reported third-quarter results, saying shortterm costs could increase due to investment in a new distribution centre.

Asia

Japanese stocks soared Tuesday on a weak yen as the dollar was lifted by expected monetary tightening and renewed hopes for Donald Trump’s economic agenda, but most other Asian markets retreated after recent gains.

Japanese dealers returned from a three-day weekend Tuesday and picked up the baton, sending the Nikkei two percent higher with exporters buoyed by the dollar’s push towards 112 yen.

However, elsewhere in the region markets turned lower as traders cashed out.

Hong Kong closed down 0.4 percent, Shanghai ended off 0.2 percent, Singapore lost 0.2 percent and Sydney dipped 0.1 percent. Seoul was off 0.1 percent, with Taipei 0.5 percent off and Manila 1.3 percent down.

- Key figures around 0820 GMT Tokyo - Nikkei 225: UP 2.0 percent at 20,299.38 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 28,051.41 (close)

Shanghai - Composite: DOWN 0.2 percent at 3,356.84 (close)

Dollar/yen: UP at 111.75 yen from 111.56 yen

Oil

Oil prices edged higher on Tuesday, trading close to five-month highs after key Middle Eastern producers showed they continued to comply with output cuts under an OPEC-led deal that Iraq’s oil minister said could be extended or deepened.

A weaker US dollar also lent support to dollar-denominated commodities such as oil, traders said.

Benchmark Brent crude futures were up 6 cents at $55.54 a barrel by 1333 GMT, not far off a five-month high of $55.99.

US West Texas Intermediate (WTI) crude futures were up 34 cents at $50.25.

Sentiment has been buoyed since last week when the International Energy Agency (IEA) lifted its 2017 demand outlook and the Organization of the Petroleum Exporting Countries estimated that the world would need more of its crude next year.

“The bullish trend for oil is fed by a few factors, like upward revisions in oil demand from OPEC and the IEA, Saudi Arabian exports dropping to a three-year low in the summer and, last but not least, continuing weakness of the US dollar,” said Frank Schallenberger, head of commodity research at LBBW.

Adding to the bullish mood, OPEC’s second-biggest producer Iraq said on Tuesday that the group was discussing several options for its supply pact, including an extension beyond March and a further output cut.

Iraq itself has limited output by about 260,000 barrels per day (bpd), its oil minister said, exceeding its 210,000 bpd quota agreed under the OPEC-led pact.

His comments come a day after official export data showed that Saudi Arabian July crude exports dropped to the lowest level in three years, highlighting its own compliance with the restrictions.

Gold

Gold rose from the previous day’s two-week low on Tuesday as the dollar slipped ahead of a Federal Reserve meeting that is expected to provide more clues on the pace of US monetary tightening.

The dollar fell 0.3 percent against the euro ahead of the two-day talks, with markets awaiting guidance on whether the Fed will signal a further hike in interest rates at its December meeting.

Spot gold was up 0.3 percent at $1,310.51 an ounce at 1345 GMT, off the previous day’s low of $1,304.10. US gold futures for December delivery were up $3.20 an ounce at $1,314.00.

“Investors have a tendency to stay on the sidelines ahead of the Fed and other important events, so that trading becomes more technical,” ABN Amro analyst Georgette Boele said.