Global equities gain on stimulus hopes, pound hits six-week high

Oil gets boost as new Saudi minister commits to output cuts

LONDON, Sept 9, (RTRS): Stocks gained on Monday as investors pinned their hopes on expected stimulus from the world’s central banks to support slowing growth, while the pound hit a sixweek high on hopes that Britain will not quit the EU without a deal.

MSCI’s All Country World Index, which tracks shares across 47 countries, was up 0.06%.

British Prime Minister Boris Johnson will try for a second time on Monday to call a snap parliamentary election, but is set to be thwarted once more by opposition lawmakers who want to ensure he cannot take Britain out of the European Union without a divorce agreement in place. Sterling hit a six-week high of $1.2385 as investors saw the threat of a “no-deal” Brexit easing.

In a note published late on Friday, strategists at Goldman Sachs raised the probability of a Brexit deal to 55% from 45% and cut the likelihood of a “no deal” to 20% from 25% previously.

European stock markets pared early gains, with the pan-European STOXX 600 index flat by midday in London. Earlier up on the day, the index eased as the pound’s strength weighed on internationally exposed British stocks.

Germany’s trade-sensitive DAX index rose 0.3% after data showed that seasonally adjusted exports rose 0.7% in July. A Reuters poll of economists had pointed to a drop of 0.5%.

But the prospect of central bank support kept risk sentiment buoyant. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% and Emini futures for the S&P 500 index were up 0.25%. On Friday, China’s central bank cut reserve requirements for a seventh time since early 2018 to free funds for lending .

Federal Reserve Board Chairman Jerome Powell said the US central bank would continue to “act as appropriate” to sustain US economic expansion, while the European Central Bank is expected to cut rates this week .

The euro fell to a five-day low before recovering ground to trade 0.1% higher at $1.1032. The dollar was 0.05% lower against a basket of currencies. It traded at 106.995 yen, off the one-month peak of 107.235 scaled late last week. In fixed income, longer-dated eurozone government bond yields ticked higher, with most yields up 3 to 4 basis points in early trade. . Oil rose on expectations that Saudi Arabia, the world’s largest oil exporter, will continue to support output cuts by OPEC and other producers to prop up prices under new Energy Minister Prince Abdulaziz bin Salman.

US

Wall Street’s main indexes edged higher on Monday as investors bet on increased chances of monetary stimulus from central banks around the world to boost slowing growth.

A rise in US Treasury yields, with those on 10-year notes climbing to threeweek peaks, led investors to switch from bonds to riskier assets. Big lenders, including Goldman Sachs, were among the biggest beneficiaries.

Financial stocks rose 1.39%, the biggest boost among the 11 major S&P sectors with banks gaining 2.67%.

Energy stocks led gains on the S&P 500 with a 1.97% rise, as oil prices got a boost from the new Saudi energy minister committing to output cuts.

At 11:47 am. ET, the Dow Jones Industrial Average was up 70.37 points, or 0.26%, at 26,867.83, the S&P 500 was up 3.60 points, or 0.12%, at 2,982.31 and the Nasdaq Composite was up 7.10 points, or 0.09%, at 8,110.17.

Among other stocks, AT&T Inc gained 2.66% after shareholder Elliott Management Corp disclosed a $3.2 billion stake in the company and pushed for changes. Boeing Co fell 1.10% after it suspended load testing of its new widebody 777X aircraft over the weekend as media reports said a cargo door failed in a ground stress test.

Amgen Inc fell 3% after analysts raised questions about data on the company’s lung cancer drug, dragging the healthcare sector down 1.14%.

Shares of Fred’s Inc plunged 46.27% to a record low after the discount retailer said it filed for Chapter 11 bankruptcy protection. Advancing issues outnumbered decliners by a 1.60-to-1 ratio on the NYSE and by a 1.67-to-1 ratio on the Nasdaq. The S&P index recorded 33 new 52-week highs and two new lows, while the Nasdaq recorded 47 new highs and 41 new lows.

UK

London’s FTSE 100 fell on Monday as the pound ploughed ahead after unexpectedly robust economic data and as no-deal Brexit worries tempered, leaving internationally-focussed stocks in the dumps.

The blue-chip index lost 0.6%, shedding earlier gains and lagging its European peers, due to steep falls in pharmaceutical shares AstraZeneca, GlaxoSmithKline , and consumer goods giant Unilever.

The FTSE 250 index dipped 0.1%, though losses were limited thanks to a 10.4% surge in Intu Properties after the Times reported that private equity firm Orion Capital Managers was looking to buy the shopping centre operator.

Sterling scaled a six-week high as fears of a recession were kept in check after data showed Britain’s economy picked up more than expected in July despite Brexit uncertainty.

However, the local currency handed back some of those gains after news that John Bercow, Speaker in Britain’s House of Commons, would be standing down from the role.

Europe

European stocks finished lower on Monday as Britain’s export-heavy FTSE index tumbled due to a stronger pound, while selling in defensive sectors such as healthcare and utilities dented early gains in markets.

After rising as much as 0.2% after a surprise rise in German exports and hopes of stimulus from the European Central Bank later this week, the panEuropean STOXX 600 index gave up gains as the day wore on.

The index closed down 0.3%, ending a three-day run of gains, as internationally focused shares of the FTSE 100 dropped 0.6% following gains for the pound on optimism that Britain will not crash out of the European Union without a deal. However, investors were mostly looking ahead to the ECB’s policy meeting on Thursday, when the central bank is expected to introduce a new wave of monetary stimulus.

Europe’s banking index, the worst performer this year among major subsectors, rose 2.2% to hit more than a one-month high. The index has recovered from near 8-year lows hit in midAugust amid a broad recovery on hopes of a resolution to the U.S.-China trade dispute and in the past weeks, as investors tempered expectations of aggressive easing measures from the ECB.

Banking-heavy indexes of Milan and Madrid rose about 0.2%, with Santander’s shares gaining 2.4% after the Spanish bank said it would raise its ownership of its Mexican business to 91.65% from 74.96% after a stock exchange offer.

Automakers, meanwhile, jumped 2% after upbeat German export data in July, while dimming chances of a no-deal Brexit helped Germany’s carmakers, whose key destination is Britain.

Also helping Frankfurt-listed shares close 0.3% higher, a report said Germany was considering the creation of a “shadow budget” that would enable Berlin to boost public investment beyond the restrictions of constitutionally enshrined debt rules, sources told Reuters.

On the other end, shares of defensive sectors including healthcare, food and beverage and utilities , which have enjoyed a strong run-up this year, fell about 1.7%, weighing on the STOXX 600.

Shares in Air France slid 10% to the bottom of the index after disappointing August numbers, while IAG fell 1.5% as British Airways pilots began a 48-hour strike. Together, the stocks drove the travel and leisure sector down 0.5%.

Asia

Asian shares were mostly higher Monday as the week started with a mix of economic data for the region and the U.S.

Japan’s benchmark Nikkei 225 rose 0.5% in afternoon trading to 21,308.51. Australia’s S&P/ASX 200 stood unchanged at 6,647.30. South Korea’s Kospi gained 0.6% to 2,020.41. Hong Kong’s Hang Seng added nearly 0.1% at 26,714.80, while the Shanghai Composite rose 0.6% to 3,017.11.

The Japanese government released revised economic growth data for the April-June quarter. The Cabinet Office said gross domestic product, or GDP the total value of a nation’s goods and services - had grown at an annual rate of 1.3%. That was slightly lower than the earlier estimate for 1.8% growth. The data showed that private demand had grown at a slower rate but government investment had risen higher than the earlier estimate.

Chinese customs data showed Sunday that China’s trade with the United States was falling as the two sides prepare for negotiations with no signs of progress toward ending a tariff war that threatens global economic growth.

Imports of American goods tumbled 22% in August from a year earlier to $10.3 billion, while exports to the United States, China’s biggest market, sank 16% to $44.4 billion, according to the data.

Both sides have raised tariffs on billions of dollars of each other’s imports in the fight over complaints about Beijing’s trade surplus and technology development plans. The United States, Europe, Japan and other trading partners say those violate Chinese market-opening commitments.

Oil

Oil prices rose more than 1% on Monday after the new Saudi energy minister, Prince Abdulaziz bin Salman, confirmed expectations that there would be no radical change in his country’s oil policy.

Prince Abdulaziz, son of Saudi King Salman and a long-time member of the Saudi delegation to the Organization of the Petroleum Exporting Countries (OPEC), replaced Khalid al-Falih on Sunday. “The move is bullish for oil prices,” Phil Flynn, an analyst at Price Futures Group in Chicago, said in a note. “Prince Abdulaziz bin Salman is known as an oil production cutter. He has been instrumental in securing production cuts in the past.”

Brent crude futures gained 74 cents, or 1.2%, to $62.28 a barrel by 10:40 am. EDT (1440 GMT), while US West Texas Intermediate (WTI) crude futures rose $1.06, or 1.9%, to $57.58 a barrel.

Prince Abdulaziz said on Monday the pillars of Saudi Arabia’s policy would not change and a global deal to cut oil production by 1.2 million barrels per day would survive.

He added that the so-called OPEC+ alliance between OPEC and non-member countries including Russia was staying for the long term. Russia’s oil output in August exceeded its quota under the OPEC+ agreements.

Currencies

The euro rose on Monday after a report that Germany may boost fiscal stimulus increased hopes that governments will act to boost growth in the region, though expectations of further central bank easing kept a lid on gains. Germany is considering the creation of a “shadow budget” that would enable Berlin to boost public investment beyond the restrictions of constitutionally enshrined debt rules, three people familiar with the internal discussions told Reuters.