Global equities rise as US averts govt shutdown; sterling retreats

Oil up more than 2 percent on Saudi and OPEC cuts

NEW YORK, Feb 12, (Agencies): US stocks on Tuesday headed for their sharpest gains this month as lawmakers avoided another partial government shutdown and with USChina trade talks back on.

The agreement on border security involves far less money for a wall than the White House wanted, and it’s not clear whether President Donald Trump will support the deal. Still, the move alleviates some uncertainty for the market ahead of talks that businesses hope will end a damaging trade war between the world’s biggest economies.

Both nations are trying to reach a deal before March 1. That’s when additional tariffs will kick in, escalating the conflict and further hurting companies and consumers with higher prices on materials and products.

Elsewhere, companies are wrapping up an earnings season that’s featured solid profit growth for the final three months of 2018, but caution about conditions going forward. Analysts predict profits will fall in the current quarter, according to FactSet.

Brewer Molson Coors fell as lower volume reduced revenue and profit. Under Armour rose after stronger sales helped it beat forecasts.

The Dow Jones Industrial Average rose 315.9 points, or 1.3 percent, to 25,371 as of 11:40 a.m. The S&P 500 index rose 1.2 percent and the Nasdaq composite rose 1.4 percent.

Markets in Europe and Asia are also broadly higher. Fears of a global slowdown still linger as the US and China head into trade talks. Britain, Europe broadly and China have all reported slower economic growth.

US

Wall Street’s main indexes rose over 1 percent on Tuesday, in a broad-based rally fueled by a tentative deal reached by American lawmakers to avoid another partial government shutdown and hopes that the US-China trade talks could result in an agreement.

Trade-sensitive industrials climbed 1.3 percent, boosted by Boeing Inc, Caterpillar Inc and 3M Co.

Chipmakers, which depend on China for a huge chunk of their revenue, also rose and pushed the Philadelphia chip index 1.86 percent higher.

The broader technology sector rose 1.19 percent, lifted by gains in Apple Inc, Microsoft Corp and Intel Corp.

The S&P 500 index is just about 7 percent away from its Sept 20 record closing high, driven by optimism on trade, a largely upbeat fourth-quarter earnings season and a dovish Federal Reserve.

About 71 percent of the S&P companies that have posted earnings have topped expectations, according to IBES data from Refinitiv. But analysts’ estimates for first-quarter earnings have turned negative for the first time since 2016.

At 11:06 am ET, the Dow Jones In- dustrial Average was up 278.90 points, or 1.11 percent, at 25,332.01. The S&P 500 was up 29.53 points, or 1.09 percent, at 2,739.33 and the Nasdaq Composite was up 96.78 points, or 1.32 percent, at 7,404.68.

Seven of the 10 major sectors trading higher posted gains of more than 1 percent, with the financial group’s 1.49 percent rise the steepest, supported by higher bond yields.

Only the real estate sector was trading lower.

Cosmetics maker Coty Inc surged 14.4 percent, the most on the S&P, after German conglomerate JAB Holding Co said it planned to hike its stake.

Electronic Arts Inc jumped 3.4 percent after the videogame maker’s newly launched battle royale game gained traction. Rival Take-Two lost 5.2 percent following a downgrade by a 5-star analyst.

Advancing issues outnumbered decliners by a 3.63-to-1 ratio on the NYSE and by a 3.56-to-1 ratio on the Nasdaq.

The S&P index recorded 31 new 52week highs and one new low, while the Nasdaq recorded 56 new highs and seven new lows.

UK

UK shares lagged their euro-zone peers on Tuesday as growing risks of a disorderly Brexit rattled investors, while poor results from tour operator TUI and a profit warning from online trading platform Plus500 sapped appetite for stocks.

The mood soured on the main indices in choppy afternoon trade as Prime Minister Theresa May urged lawmakers to back her Brexit deal and Bank of England Governor Mark Carney warned again of the economic damage if Britain leaves the EU without a deal.

While the speeches did not contain any news, the comments reinforced concerns about the protracted deadlock between Parliament and Brussels.

The FTSE 100, which makes 70 percent of its income overseas, closed up 0.1 percent, after briefly falling into negative territory as sterling recouped some losses during May’s speech. The currency hit a three-week low earlier in the day.

Investors were tense ahead of Thursday, when parliament will debate Brexit with no date yet set for a further vote on May’s deal.

Some of the biggest losers were companies exposed to the domestic economy, such as pubs, supermarkets, utilities and housebuilders, while gains were in oil majors, miners and multinational banks.

The domestically focused FTSE 250 ended down 0.1 percent as a plunge in Plus500 shares accounted for almost all the index’s 31-point drop.

A standout faller on the day was Plus500, which lost nearly a third of its value, after the online trading platform blamed a regulatory crackdown for its profit and revenue warning.

The stock slumped 30 percent on its worst day in more than three-and-a-half years, and dragged rival IG Group down 4.3 percent.

Dragging the FTSE 100 down was tour operator TUI , which has slumped since a profit warning last week, tumbling 7.5 percent to its lowest since July 2016 as its firstquarter loss widened. Travel sector peers easyJet and British Airways owner IAG also fell 1.7 percent each, while Thomas Cook lost 4.9 percent.

Housebuilders Barratt Development, Persimmon, Taylor Wimpey, and Berkeley fell 1.7 to 2.4 percent as investors shed stocks seen as vulnerable to a nodeal Brexit. Small-cap retailer Debenhams shot up 28 percent to its best day on record after it secured additional funding from lenders as it struggles to find a longer-term solution to its financial woes.

Europe

European shares opened higher on Tuesday as investors cheered signs of a compromise in the standoff over the US government funding and positive signals around US-China trade talks, while Michelin’s results pumped up tyre stocks.

The pan-European STOXX 600 was up 0.6 percent at 0940 GMT, with Germany’s trade-sensitive DAX up 1.1 percent and Paris’ CAC 40 up 0.8 percent.

Automakers and their suppliers were the biggest gainers, up 2 percent after Michelin delivered better-than-expected results and pledged further gains in operating profit this year despite challenging conditions.

The French tyre maker’s shares rallied more than 10 percent and were on track for their best day in nearly a decade.

Italy’s Pirelli and Germany’s Continental were among the top gainers in their domestic markets and on the STOXX 600.

Gucci owner Kering shares turned positive in midmorning trade as investors took comfort from upbeat comments about the Q1 outlook.

Shares had fallen as much as 3.3 percent in early deals as the better-than-expected sales failed to impress investors, a sign of the demanding expectations for luxury brand earnings following solid numbers from the sector, including LVMH last week.

Thyssenkrupp shares fell 2 percent after its mixed report. The German steelto-elevator maker stood by its 2018/19 targets, but warned the global economic environment is darkening after reporting a big drop in first-quarter results.

Investors continued to punish TUI as the tour operator reported a widening loss in its quarter to end-December. That follows its profit warning last week.

Online trading platform Plus500 lost more than a third of its value after the company issued a profit and revenue warning, blaming tightening EU regulation on its retail business. The news dragged peer IG with it.

Asia

Asian stocks rose Tuesday following a listless day on Wall Street as investors looked ahead to US-Chinese trade talks.

Tokyo’s Nikkei 225 rose 2.6 percent to 20,871.36 and the Shanghai Composite Exchange added 0.6 percent to 2,669.66. Hong Kong’s Hang Seng was 7 points higher at 28,151.38 and Seoul’s Kospi gained 0.5 percent to 2,192.48. Sydney’s S&P-ASX 200 advanced 0.3 percent to 6,079.10 and India’s Sensex was unchanged at 36,391.38. New Zealand, Taiwan and Thailand rose while Singapore declined.

Oil

Oil prices gained more than 2 percent on Tuesday, supported by OPEC-led production cuts, which Saudi Arabia said it would surpass by more than half a million barrels per day (bpd), and by US sanctions against Iran and Venezuela.

Brent crude futures were up $1.40, or 2.28 percent, at $62.91 a barrel by 1325 GMT. US West Texas Intermediate (WTI) crude oil futures rose $1.22, or 2.33 percent, to $53.63.

Markets are tightening because of voluntary production cuts, effective since Jan 1, led by the Organization of the Petroleum Exporting Countries and allies including Russia aimed at forestalling a global overhang.

Saudi Arabia, the world’s top oil exporter and de facto leader of OPEC, said it would reduce crude production to around 9.8 million bpd in March, over half a million bpd more than it originally pledged.

Energy Minister Khalid al-Falih announced the move in an interview with the Financial Times published on Tuesday, as the kingdom seeks to drive up oil prices to help fund an economic transformation plan.

However, rising US oil production, fighting near Libya’s main oilfield, sanctions on Venezuela and suspense over whether Washington will grant more waivers to import Iranian oil leave markets unsure about broader supply.

OPEC cut its forecast for 2019 world oil demand on Tuesday due to slowing economies and expectations of faster supply growth from rivals, underlining its challenge to prevent a glut.

Also on the radar are hopes expressed by US and Chinese officials that a new round of talks, which began in Beijing on Monday, would bring them closer to easing their months-long trade war.

Beijing and Washington are trying to hammer out a deal before a March 1 deadline, without which US tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

Currencies

The British currency rose off threeweek lows against the dollar on Tuesday as Prime Minister Theresa May said the government would seek to speed up ratification of its Brexit withdrawal deal with the European Union if time gets too tight.

The deadlock and delays over the terms of Brexit have heightened fears among financial investors of a no-deal and disorderly, economically disruptive departure even if the majority of British lawmakers want to avoid one.

British media have reported a fresh vote is not expected until late February at the earliest.

“Further delay is unlikely to be welcomed by business. However the prime minister appears determined to push her deal to the wire, given the lack of a parliamentary majority for any other options,” said Michael Hewson, analyst at CMC Markets.

“This continued brinkmanship has seen the pound slip to a three-week low against the US dollar.”

The pound rose 0.2 percent to $1.2876, its weakest since Jan 21.

Versus the euro, sterling held its own and was unchanged on the day at 87.695 pence per euro.