Global equities rebound as lira pulls out of nosedive, oil jumps

Gold advances as greenback softens

NEW YORK, Aug 14, (Agencies): World share markets rebounded on Tuesday as Turkey’s lira pulled out of a recent nosedive and reassuring data from Germany helped offset the latest wobbles in China’s giant economy.

After three weeks of heavy pounding, the lira got some respite as signs Turkish authorities were trying to address the unresolved damage triggered a more than 5 percent relief rally to just under 6.5 per dollar.

Still, the currency lost almost 10 percent on Monday and nerves were briefly tested again as President Tayyip Erdogan urged Turks to boycott US electronic products in response to recent criticism from Washington.

A much-needed demand slowdown in Turkey is causing asset quality problems in banks, he said. The role of construction in the Turkish economy, for example, is comparable to that in Spain or Ireland ahead of the European bust a decade ago, he said. MSCI’s gauge of global equity markets halted a four-day slide to rise 0.32 percent, while Japan’s Nikkei jumped 2.28 percent in its biggest one-day gain since March.

European shares steadied after a two-day selloff as concerns about contagion from Turkey’s currency crisis eased. The pan-regional FTSEurofirst 300 index closed up 0.06 percent and the benchmark STOXX 600 closed flat.

Data showing the region’s largest economy, Germany, picking up more steam than expected in the second quarter helped sentiment in Europe, though the markets’ bounce might have been bigger had Chinese economic surveys not disappointed.

Investment growth slowed to a record low while industrial output and retail sales both missed expectations.

The downdraft for emerging market currencies stopped, with the South African rand, Russian ruble and Mexican peso, a proxy for emerging market currencies, all rising.

Still, MSCI’s emerging markets index for equities fell 0.27 percent to its lowest since July 2017.

Stocks on Wall Street rallied. The Dow Jones Industrial Average rose 120.76 points, or 0.48 percent, to 25,308.46. The S&P 500 gained 19.56 points, or 0.69 percent, to 2,841.49 and the Nasdaq Composite added 57.31 points, or 0.73 percent, to 7,877.02.

The euro fell, hitting 13-month lows against the dollar and Swiss franc, as traders fretted over the exposure of European banks to Turkey.

The dollar index rose 0.35 percent, with the euro down 0.61 percent to $1.1338. The Japanese yen weakened 0.33 percent versus the greenback at 111.10 per dollar.

Oil prices jumped after Saudi Arabia said it cut production, adding to concerns about global supply as US sanctions against Iran bite its exports.

US crude rose 18 cents to $67.38 a barrel and Brent gained 22 cents to $72.83.

US

US stocks rose in a broad rally on Tuesday after four straight days of losses on a strong set of earnings from retailers and as bank stocks rebounded after the Turkish lira snapped a threeweek slide.

All 11 major S&P sectors were trading higher, with financials rising 0.63 pct.

Shares of US lenders - Citigroup, JPMorgan, Wells Fargo, Bank of America, Goldman Sachs - rose between 0.20 percent and 1 percent.

The KBW bank index gained 1.02 percent, bouncing back from a 3 percent loss raked in over three sessions as investors fretted about banks’ exposure to Turkey.

Among the encouraging earnings reports was Home Depot, whose shares climbed 1 percent after the home improvement retailer beat analysts’ quarterly sales estimates despite signs of a slowdown in the housing market.

The report from Home Depot, a member of Dow Jones Industrial Average, sent the shares of smaller rival Lowe’s higher by 1.2 percent.

At 12:26 am EDT the Dow Jones Industrial Average was up 112.79 points, or 0.45 percent, at 25,300.49 and the Nasdaq Composite was up 53.20 points, or 0.68 percent, at 7,872.91.

The S&P 500 was up 18.42 points, or 0.65 percent, at 2,840.35, just 1.1 percent shy of the record levels hit in late January.

Technology shares rose 0.66 percent and was the biggest boost to the benchmark index, led by Microsoft’s 1.1 percent rise.

Also lifting the sector was Nvidia, which gained 2 percent, after the company rolled out its newest generation of chip technology.

Tapestry jumped 13 percent, the most on the S&P index, after strong sales of its Kate Spade handbags helped the company’s full-year forecast top analysts’ expectations.

Advance Auto Parts rose 7.7 percent after the company beat quarterly profit estimates and announced a new share buyback program.

The second-quarter earnings season is tapering down. Of the 458 companies in the S&P 500 that have reported so far, 79 percent have beaten analysts’ estimates, according to Thomson Reuters I/B/E/S.

Advancing issues outnumbered decliners by a 2.86-to-1 ratio on the NYSE and by a 1.86-to-1 ratio on the Nasdaq.

The S&P index recorded 22 new 52week highs and three new lows, while the Nasdaq recorded 74 new highs and 61 new lows.

Europe

European shares rose slightly on Tuesday after two days of heavy selling as investors’ anxieties over contagion from a Turkish currency crisis faded and reassuring data from Germany helped offset the latest wobbles in China’s giant economy.

The pan-European STOXX 600 benchmark closed 0.1 percent higher, with financials weighing the most on the index and eurozone banks down 0.5 percent.

Antofagasta shares posted the worst performance, down 7 percent after the Chilean copper producer reported first-half earnings fell due to weaker ore quality and higher costs, and said trade tensions were likely to hurt demand.

Shares of Italy’s Atlantia, which owns Autostrade, fell 5.4 percent after a motorway bridge collapsed in torrential rains in the northern Italian port city of Genoa, killing at least 35 people.

Some positive corporate earnings also reassured investors.

German utility RWE rose 3.6 percent after it said its Innogy deal was on track and reported in-line first half profits.

K&S shares fell 4.6 percent after the potash miner reduced the profit outlook for its Salt business.

Overall companies in the MSCI Europe index have delivered year-onyear earnings growth of 11.9 percent in the second quarter, helping to support the market.

Siltronic shares fell 4.4 percent after Citi downgraded the stock to “neutral”, saying the stock is now trading close to fair value and there is limited scope to raise estimates.

Asia

Turkey’s lira edged up with other emerging market currencies in Asian trade Tuesday while equities also enjoyed a bounce after the previous day’s turmoil. Fears about contagion in other economies, particularly emerging markets, sparked a sell-off across the board Monday but there were healthy recoveries in Asian business.

The Russian ruble, which lost two percent Monday, jumped 1.7 percent, while the South African rand was 2.2 percent higher, having lost seven percent a day earlier. The Mexican peso was up 1.8 percent.

South Korea’s won was up 0.5 percent after losing almost one percent.

However, the rupee continued to suffer, briefly falling to a record low of 70 to the dollar as the crisis exacerbated a months-long sell-off in the Indian currency, which was already under pressure from a huge current-account deficit and higher oil prices.

On equity markets, Tokyo ended 2.3 percent higher as the safe-haven yen eased against the dollar, providing some support to exporters.

Sydney added 0.8 percent and Seoul was 0.5 percent higher, with Wellington, Mumbai and Taipei also posting healthy gains. Singapore was flat.

But Shanghai ended 0.2 percent lower and Hong Kong slipped 0.7 percent.

Key figures around 0810 GMT Dollar/yen: UP at 111.05 yen from 110.63 yen

Tokyo - Nikkei 225: UP 2.3 percent at 22,356.08 (close)

Hong Kong - Hang Seng: DOWN 0.7 percent at 27,752.93 (close)

Shanghai - Composite: DOWN 0.2 percent at 2,780.96 (close)

Oil

Oil prices jumped on Tuesday after Saudi Arabia said it cut production, adding to concerns over global supply as US sanctions against Iran curb its exports, though the prospect of a slowdown in global economic growth kept a lid on markets.

Global benchmark Brent crude had risen $1.32, or 1.8 percent, to a high of $73.93 a barrel by 1330 GMT. US light crude was up $1.10 a barrel at $68.30.

OPEC itself, using secondary sources, estimated in a report published on Monday that Saudi production was at a slightly higher level of 10.39 million bpd last month.

The lower Saudi output coincides with expected export declines from Iran as Washington re-imposes sanctions on Tehran.

But output from non-OPEC countries, particularly the United States, is rising quickly, limiting demand for OPEC oil.

OPEC expects oil supply by countries outside the cartel to increase by 2.13 million bpd next year, 30,000 bpd more than forecast last month, with much of the increase coming from new US shale production.

US oil output from seven major shale basins is expected to rise 93,000 bpd in September to 7.52 million bpd, the US Energy Information Administration said on Monday.

Gold

Gold rose from near 18-month lows on Tuesday, attempting a break back above the key $1,200 level as the dollar softened and analysts said the precious metal could have fallen too far.

Spot gold was up 0.3 percent to $1,196.10 an ounce at 1300 GMT. In the previous session, the metal hit $1,191.35, its lowest since Jan. 30, 2017.

US gold futures were up 0.3 percent at $1,202.10 per ounce.

The bearish stance on gold continued to be reflected in record short positions and in the outflow of gold exchange traded products.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 0.19 percent to 784.60 tonnes on Monday from Friday. Holdings have fallen about 10 percent from their peak in April and are at their lowest since February 2016.