Global stocks advance, with Wall St buoyed by tech; bond yield retreats

Oil prices rise as Iranian crude exports fall

NEW YORK, Oct 9, (Agencies): Equity markets climbed in Europe and the United States, with Wall Street buoyed by a rebound in technology shares off twomonth lows and as long-dated US Treasury yields pulled back from multi-year highs.

Stock markets in Asia and Europe trimmed earlier losses after a fourday selloff that had pushed shares in Asia to a 17-month low and knocked European shares to six-month lows.

Ongoing worries about a standoff between the European Union and Italy over the country’s budget had pushed Italian borrowing costs to their highest since 2014 and weighed on the euro, while Treasury yields hovered at seven-year highs.

The Chinese yuan steadied near a seven-week low against the greenback as a liquidity squeeze in the offshore market for renminbi in Hong Kong helped stabilize sentiment.

MSCI’s index of stock markets across the globe traded flat after paring losses, while the pan-European FTSEurofirst 300 index rose 0.33 percent.

On Wall Street, the Dow Jones Industrial Average rose 13.81 points, or 0.05 percent, to 26,493.40. The S&P 500 gained 2.97 points, or 0.10 percent, to 2,887.45 and the Nasdaq Composite added 26.47 points, or 0.35 percent, to 7,761.86.

US long-dated Treasury yields slipped from multi-year highs in choppy trading as investors took a breather from selling last week. Those sales had come on fears inflation might accelerate and prompt the Federal Reserve to hasten the pace of interest rate hikes.

The bond market was closed on Monday for the Columbus Day holiday.

Benchmark 10-year US Treasury notes last rose 1/32 in price to yield 3.22 percent. The 30-year US Treasury bond rose 6/32 in price to pull the yield down to 3.38 percent.

The dollar index rose 0.01 percent, with the euro down 0.06 percent to $1.1483. The dollar fell 0.09 percent to 113.10 yen.

Oil prices rose on evidence of falling crude exports from key producer Iran, before the imposition of new US sanctions and a partial shutdown in the Gulf of Mexico because of Hurricane Michael.

US crude rose 0.75 percent to $74.85 per barrel and Brent was last at $84.76, up 1.01 percent on the day.

US

The S&P 500 and the Nasdaq rose on Tuesday, boosted by a rebound in technology stocks, but gains, including on the blue-chip Dow Jones Industrial Average, were kept in check by concerns on slowing global growth.

The International Monetary Fund lowered its global economic growth forecasts for 2018 and 2019, and its 2019 estimates for US and China, saying the two countries would feel most of the impact of their trade war next year.

That pushed the trade-sensitive industrials sector down 0.62 percent, with Boeing falling more than 1 percent and Caterpillar down over 2 percent.

But, defying the much steeper losses that stock futures were pointing towards, eight of the 11 major S&P sectors were in positive territory.

The heavyweight technology sector rose 0.36 percent, with gains in Microsoft and other software companies more than offsetting a drop in chipmakers, who count Chinese companies among their main clients.

The communication services group gained 0.26 percent, with Facebook’s 1.8 percent gain helping offset a roughly 1 percent drop in Alphabet.

Alphabet continued its losses from Monday when it said it would shut down its social network Google+ and tighten its data sharing policies after finding that private profile data of at least 500,000 users may have been exposed to hundreds of external developers.

At 10:20 am ET the Dow Jones Industrial Average was down 20.80 points, or 0.08 percent, at 26,465.98, the S&P 500 was up 2.78 points, or 0.10 percent, at 2,887.21 and the Nasdaq Composite was up 30.08 points, or 0.39 percent, at 7,766.03.

The materials index slid 1.66 percent, weighed down by a drop in chemical companies after PPG’s results and paper packaging companies following BMO’s negative comments on capacity and stock valuations.

PPG Industries tumbled 7.8 percent, the most on the S&P, after the specialty chemicals maker said its current-quarter profit would be hit by higher raw material costs.

Energy stocks were up 0.34 percent as oil prices rose on growing evidence of falling Iranian crude exports.

Advancing issues outnumbered decliners for a 1.09-to-1 ratio on the NYSE and a 1.31-to-1 ratio on the Nasdaq.

The S&P index recorded 10 new 52week highs and 22 new lows, while the Nasdaq recorded 6 new highs and 51 new lows.

Europe

European stock markets ended a rollercoaster session higher as tensions lessened in the bond markets and tech stocks recovered, dealers said.

Although still worried about Italy’s fiscal stability, investors breathed a sigh of relief as bond yields eased and the euro slipped against the dollar.

Early Tuesday, the Italian benchmark 10-year bond yield rose another nearly four basis points to 3.60 percent, compared to Germany’s 0.55 percent, but then slipped back to 3.51 percent – still the second-highest government bond yield in the eurozone after Greece.

Brussels and Rome are at loggerheads after Italy’s populist government passed a purse-busting budget last week, to the annoyance of EU officials.

The British pound recovered on Tuesday on rising hopes of a breakthrough in Brexit negotiations, after earlier drifting lower on the back of a stronger dollar and as investors booked profits following the recent rally. The British pound stabilised around $1.31 after earlier falling as much as 0.4 percent to $1.3034, nearing a one-month low hit last week.

Against the euro, the British currency also reversed earlier losses in later trading and rose 0.2 percent to 87.635 pence.

Asia

The sell-off in Asian markets slowed on Tuesday, with most markets seeing little movement as ongoing US-China tensions simmer.

A testy public interaction between Chinese Foreign Minister Wang Yi and US Secretary of State Mike Pompeo in Beijing on Monday refuelled market worries about China-US relations, which have taken a hefty knock from tit-for-tat tariffs.

Hong Kong edged down, slipping 0.1 percent in late trading after spending much of the day in positive territory.

“The relative calm in today’s Asia session belies the eerie sense of foreboding that continues to hang over equity markets,” said Innes.

Markets slumped in Tokyo for a fourth consecutive session, falling 1.3 percent as traders returned from a long weekend, with stocks dragged down by a higher yen, worries over China, and a trading system glitch which affected part of the trading day.

Toyota, which announced a massive recall of its hybrid cars on Friday, plunged three percent. Key figures around 0830 GMT Hong Kong - Hang Seng: DOWN 0.1 percent at 26,172.91 (close)

Shanghai - Composite: UP 0.2 percent at 2,721.01 (close)

Tokyo - Nikkei 225: DOWN 1.3 percent at 23,469.39 (close)

Dollar/yen: DOWN at 113.35 from 113.66 yen

Oil

Oil prices rose on Tuesday on growing evidence of falling crude exports from Iran, OPEC’s third-largest producer, before the imposition of new US sanctions and a partial shutdown in the Gulf of Mexico because of Hurricane Michael.

Benchmark Brent crude jumped by $1.13 a barrel to a high of $85.04 before easing back to $84.56, up 65 cents, by 1330 GMT. Brent hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday.

US light crude was up 40 cents at $74.69.

“The oil market mood is exceptionally bullish, with fears growing that the US demands for an Iran oil embargo could cause a significant supply shortfall,” Julius Baer commodities research analyst Carsten Menke said.

Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of US sanctions that take effect on Nov 4.

Iran exported 1.1 million barrels per day (bpd) of crude in that seven-day period, Refinitiv Eikon data showed. An industry source who also tracks exports said October shipments so far were below 1 million bpd.

That is down from at least 2.5 million bpd in April, before President Donald Trump in May withdrew the United States from a 2015 nuclear deal with Iran and re-imposed sanctions. The figure also marks a further fall from 1.6 million bpd in September.

Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries, last week said it would increase crude output next month to 10.7 million bpd, a record.

Gold

Gold prices eased for a second session on Tuesday as a stronger dollar and bullish US interest rate outlook outweighed support from an earlier equity sell-off.

Spot gold was down 0.1 percent at $1,186.79 per ounce at 1256 GMT. On Monday, it fell 1.2 percent in its biggest one-day percentage decline since Aug. 15, also touching a more than one-week low of $1,183.19.

US gold futures edged up 0.1 percent to $1,190.00.

Europe battled to fend off a four-day losing streak for world stocks, after weary investors saw Asian shares stumble to a 17-month low and bond markets hit by fresh selling.

Adding to the bleak outlook, the International Monetary Fund cut its global economic growth forecast for the first time since 2016, citing pressure from trade tussles between the United States and China.

“Some of the main themes in gold markets are the US Federal Reserve rate hike, higher yields and dollar strength,” said Jens Pedersen, senior analyst at Danske Bank.

“At the same time, fragile emerging markets and higher oil prices will mitigate those headwinds.”

Gold has held in a $34 range for the last 1-1/2 months, which some analysts say suggests resilience, supported by concerns over economic growth in emerging markets and inflationary pressure from soaring oil prices.

Some analysts said physical buying would emerge at the lower price levels.

However, the metal, traditionally considered a prudent store of value during political and economic uncertainty, has lost much of its safe-haven appeal this year with investors increasingly opting for the greenback instead, especially as the US-China trade war unfolded.

Higher interest rates boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.

The Fed increased interest rates last month for the third time this year and is widely expected to hike again in December, with no suggestion its tightening policy will end any time soon.

Spot gold may end its recent weak bounce below resistance at $1,193 per ounce, and then retest support at $1,184, as suggested by a projection analysis, according to Reuters technical analyst Wang Tao.