Global stocks shrug off US govt shutdown; dollar dips vs majors

Oil prices soften; gold edges up

LONDON, Jan 22, (Agencies): World stocks and US bond markets on Monday shrugged off a government shutdown in Washington, although the dollar pulled back and wallowed near three-year lows as the euro resumed its strong start to the year.

The pan-European STOXX 600 index was up 0.1 percent. Germany’s DAX was flat, France’s CAC40 up 0.1 percent and the UK’s FTSE was unchanged.

The MSCI world equity index, which tracks shares in 47 countries, rose slightly.

US stock futures were down marginally after Wall Street set record highs on Friday, but investors were taking the view that the dispute between President Donald Trump and Democrats could be resolved without a prolonged shutdown.

The dollar remained stuck near threeyear lows, continuing its weak start to the year.

The single currency gained 0.2 percent and was trading at $1.22435, although volatility in the euro-dollar exchange rate was more muted than would have been expected, given flareups during previous US government shutdowns.

In European bond markets, Spain’s borrowing costs dropped to a six-week low and the gap over its German peers fell to its tightest in almost three years after Fitch Ratings gave Spain its first “A” rating since the euro zone debt crisis.

Greece’s short-dated yields also fell after S&P Global Ratings upgraded the country’s credit ratings for the first time in two years.

Oil prices climbed higher after comments from Saudi Arabia that cooperation between oil producers who have cut production to boost prices would continue beyond 2018.

After rising earlier, oil futures were flat. Brent crude futures stood at $68.58 a barrel by 1230 GMT, not far from the $70.37 level hit on Jan. 15. That was oil’s highest level since December 2014.

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US

The S&P and the Nasdaq hit fresh records on Monday as investors bet US lawmakers would strike a deal to end a federal government shutdown and as a flurry of deals buoyed sentiment.

US senators were scheduled to vote midday on a funding bill, following failed attempts over the weekend to arrive at a consensus.

At 11:03 am ET (1603 GMT), the S&P 500 was up 7.34 points, or 0.26 percent, at 2,817.64 and the Nasdaq Composite was up 35.90 points, or 0.49 percent, at 7,372.28.

The Dow Jones Industrial Average was down 12.79 points, or 0.05 percent, at 26,058.93.

Weighing on the Dow were the industrial stocks, led a 1.3 percent drop in General Electric following a downgrade and price target cut by BofA-Merrill Lynch. The stock fell below $16 for the first time since 2011, extending a losing streak from last week.

Defense stocks such as Boeing, Northrop Grumman and L3 Technologies dropped between 0.6 percent and 1.1 percent, sending the Dow Jones US Defense sector index down 0.7 percent.

Boosting the Nasdaq was a clutch of biotech deals, with the biotech index up about 2.3 percent.

Shares in US hemophilia specialist Bioverativ soared 63 percent after French healthcare group Sanofi agreed to buy the company for $11.6 billion.

Juno Therapeutics rose about 27 percent after Celgene agreed to buy the biotech for about $9 billion in cash.

Insurer AIG said it would buy reinsurer Validus Holdings for $5.56 billion. Validus surged 45 percent.

Nine of the 11 major S&P sectors were higher, led by a 1.1 percent gain in the energy index and 0.9 percent rise in utilities index.

Halliburton Co rose 4.2 percent after posting a much bigger-than-expected quarterly profit in the fourth quarter, benefiting from a shale-driven surge in US oil production.

Shares of Netflix Inc, a major contributor to the recent stock rally, were up about nearly 3 percent ahead of its quarterly results after market closes.

Advancing issues outnumbered decliners on the NYSE by 1,498 to 1,258. On the Nasdaq, 1,401 issues fell and 1,380 advanced.

Europe

A flurry of merger activity among European stocks drove strong moves on Monday as regional indexes notched up new records, with investors shrugging off the US government shutdown as a global stocks “melt-up” continued to grip European markets.

Eurozone stocks gained 0.3 percent to hit a fresh 10-year high, and the panEuropean STOXX 600 index recovered from early losses to trade up 0.3 percent.

Spain’s IBEX, which had been held back by instability in Catalonia, hit its highest since August, up 1 percent after a ratings upgrade from Fitch that also sent the country’s borrowing costs down to six-week lows.

Spain’s Santander bank was the biggest single boost to the STOXX 600, leading a rally among financials.

While strong banking and oil stocks underpinned the market, merger and acquisition news across telecoms, pharmaceuticals and luxury sectors drove the lion’s share of big stock moves.

Orange and Deutsche Telekom rose 2.1 percent each after a report in French daily Le Monde said the two companies had held merger talks last year.

French drugmaker Sanofi fell 2.9 percent after the company announced an $11.6 billion takeover of US haemophilia treatment specialist Bioverativ, with some traders saying the deal looked expensive.

Kepler Cheuvreux analysts said the deal raised a “host of questions” and wondered whether Bioverativ’s pipeline could offset pressure from a rival Roche treatment.

Swedish firm Sobi, a partner to Bioverativ, soared 16.5 percent.

Cartier owner Richemont’s offer for full control of online luxury retailer Yoox Net-a-Porter sent the Italian stock surging 24 percent to a record high.

“Given the lack of interesting acquisition targets up for sale in their core business of hard luxury, Richemont has decided to put at work its big cash pile investing into distribution channels,” wrote Bernstein analysts.

Richemont shares closed down 1.6 percent as investors digested the upto-2.8 billion euro ($3.4 billion) offer, a nearly 26 percent premium over YNAP’s closing price on Friday.

UBS, Switzerland’s biggest bank, recovered after an early fall when it reported a quarterly loss, driven by a large writedown on the US tax reforms. UBS still boosted its dividends and announced a new share buyback programme, and the stock was up 0.4 percent at the close.

Retailers performed well thanks to a 27.5 percent jump from UK online grocer Ocado after it signed an agreement with Sobeys to develop the online grocery business at Canada’s secondlargest food retailer.

Germany-listed shares in South African retailer Steinhoff rose more than 11 percent after the firm sold its 13.5 percent stake in investment firm PSG Group for 7.1 billion rand ($587 million) as it scrambled to plug a liquidity hole.

Asia

Asian equities reversed early losses Monday and built on last week’s rallies, while the euro was boosted by hopes Chancellor Angela Merkel will be able to form a new German government.

The morning saw a more cautious tone after Hong Kong hit new highs and Tokyo’s Nikkei cracked 24,000 for the first time in 26 years.

However, with the earnings season about to go into full swing and data showing economies across the globe continuing to improve, prices rebounded in most of the region in the afternoon.

Hong Kong closed up 0.4 percent at a new record and Shanghai also added 0.4 percent. Tokyo finished slightly higher on late bargain-buying.

Singapore gained 0.2 percent, while Wellington, Manila and Taipei tacked on healthy gains.

However, Sydney eased 0.2 percent and Seoul lost 0.7 percent.

Key figures around 0820 GMT Tokyo — Nikkei 225: FLAT at 23,816.33 (close)

Hong Kong — Hang Seng: Up 0.4 percent at 32,393.41 (close)

Shanghai — Composite: Up 0.4 percent at 3,501.36 (close)

Dollar/yen: Up at 110.81 yen from 110.77 yen

Oil

Oil slipped on Monday under pressure from rising Libyan output and concerns that a rally that had sent prices to their highest since December 2014 had run out of steam.

But losses were limited by comments from top exporter Saudi Arabia that OPEC and other producers would continue to cooperate on oil output cuts beyond 2018. Prices also found some support from strong economic growth that underpinned demand.

Brent crude slipped 12 cents to $68.49 a barrel by 1454 GMT, reversing after modest gains earlier in the day. Brent on Jan. 15 had hit $70.37, the highest since December 2014.

US crude fell 14 cents to $63.23, having also hit its highest since December 2014 last week.

Brent is particularly sensitive to changes in output from Libya, as most Libyan crude is priced against Brent.

Saudi Arabia said on Sunday the Organization of the Petroleum Exporting Countries and its allies had agreed to continue cooperating on production after their deal on supply cuts expires at the end of 2018. The deal began in January 2017.

Gold

Gold steadied on Monday as the dollar wallowed near three-year lows following a US government shutdown, although bullishness in the wider financial markets capped the precious metal’s gains.

Platinum hit another four-month high, narrowing the price gap to sister metal palladium to below $100 per ounce.

Global stock markets shrugged off the shutdown in Washington, with investors seemingly confident the conflict between President Donald Trump and the Democrats can be resolved swiftly.

“We did see gold reach four-month highs last week on fears an agreement wouldn’t be reached. The fact that gold is a bit soft ... suggests it was largely in the price,” said Mitsubishi analyst Jonathan Butler.

He also noted that equities continue to “defy gravity”, denting the appeal of gold as a safe haven.

“Gold is supported at $1,330 for now. We could go a bit higher as this (US) brinkmanship gets extended ... but overall we may have seen the high watermark of the gold price in relation to the US government shutdown issue.”

Spot gold edged up 0.1 percent to $1,332.63 an ounce by 1509 GMT. The precious metal fell 0.5 percent last week, its first weekly decline in six weeks, having hit four-month highs last Monday.

US gold futures were down 0.1 percent at $1,332.30.