Equities climb on report Brexit deal may be close, dollar gains

Oil prices steady on trade war jitters

NEW YORK, Oct 15, (RTRS): Stocks in Europe and on Wall Street jumped more than 1% on Tuesday on strong US corporate results and a possible deal to avoid a disorderly British exit from the European Union, while oil prices fell as weak China data kindled global economy fears.

Media reports quoting EU officials as saying negotiators were close to a Brexit deal triggered a late afternoon rally across European equity markets and helped further lift Wall Street gains from strong earnings reports.

Optimism over a Brexit breakthrough even turned the benchmark FTSE 100 stock index in London, which usually suffers from the pound’s sharp rise, positive.

Sterling climbed more than 1% as banking stocks, housebuilders and real estate jumped.

The jump in stock prices eased ongoing concerns about the impact of the prolonged US-China trade war on global growth though investors held out hope the dispute could be also be resolved.

MSCI’s gauge of stocks across the globe gained 0.97% while the pan-European STOXX 600 index rose 1.23%. The FTSEurofirst 300 index of leading regional shares closed up a preliminary 1.01%.

On Wall Street, the Dow Jones Industrial Average rose 283.62 points, or 1.06%, to 27,070.98. The S&P 500 gained 32.9 points, or 1.11%, to 2,999.05 and the Nasdaq Composite added 94.03 points, or 1.17%, to 8,142.67.

Upbeat results from JPMorgan Chase & Co, UnitedHealth Group Inc and Johnson & Johnson eased concerns about the impact from a prolonged USChina trade war on corporate America.

Chinese stocks snapped a five-day winning streak after the latest factory gate data added to China’s economic woes and the end of the trade war remained elusive.

The dollar traded mixed. The dollar index fell 0.16%, while the euro was up 0.07% at $1.1036.

The yen weakened 0.35% versus the greenback to 108.80 per dollar. Sterling rose to $1.273, up 0.98% on the day.

Oil futures were slightly lower. Brent crude fell 17 cents to $59.28 a barrel, while US West Texas Intermediate (WTI) crude dropped 13 cents to $53.46 a barrel.

US

Wall Street gained 1% on Tuesday as strong earnings from JPMorgan, UnitedHealth and Johnson & Johnson allayed concerns about the fallout from a prolonged US-China trade war on corporate America.

Shares of JPMorgan Chase & Co hit a record high after the largest US bank by assets blew past Wall Street estimates for third-quarter profit. The bank’s results lifted the S&P 500 banking sector to its highest level in more than 2-1/2 months. Goldman Sachs was the only major US bank trading lower after posting a weaker-than-expected quarterly profit.

UnitedHealth Group Inc was set to post its best day in more than a decade, while Johnson & Johnson shares eyed their biggest one-day percentage gain since January after both companies raised their profit forecasts.

The stocks were among the top boosts to the S&P 500 and Dow Jones indexes, and lifted the S&P healthcare sector to a three-week high. Eight of the 11 major S&P sectors were higher.

Analysts have forecast the worst quarterly profit performance in about three years for S&P 500 companies, with industrials among those most at risk from the trade dispute.

Wall Street has been rattled over the past 15 months by tit-for-tat tariffs by the United States and China, with the impact already reflecting in the domestic economy. After solid increases in the first quarter, gains in the three main US stock indexes have tapered off.

At 11:44 am ET the Dow Jones Industrial Average was up 269.49 points, or 1.01%, at 27,056.85. The S&P 500 was up 31.42 points, or 1.06%, at 2,997.57 and the Nasdaq Composite was up 87.74 points, or 1.09%, at 8,136.39.

Shares of mobile game developer Glu Mobile jumped 10.09% as the company is set to replace SolarEdge Technologies in the S&P SmallCap 600.

BlackRock Inc, the world’s biggest asset manager, rose 2.2% after its quarterly profit beat estimates.

D.R. Horton Inc, Toll Brothers Inc, Lennar Corp and PulteGroup Inc rose marginally after RBC Capital Markets raised its price targets on several housing stocks.

Bank of America and Morgan Stanley are due to report later this week, along with Netflix Inc, Abbott Laboratories and International Business Machines .

Advancing issues outnumbered decliners by a 2.38-to-1 ratio on the NYSE and by a 2.83-to-1 ratio on the Nasdaq.

UK

Britain’s domestically focussed mid-cap index advanced on Tuesday amid hopes that a Brexit deal could be clinched this week, though gains were capped by steep falls in the shares of a slew of companies as the latest earnings season kicked off.

The FTSE 250, which had surged more than 4% last Friday after positive Brexit signals from Ireland, added 0.3% by 0800 GMT.

JP Morgan’s UK domestic plays index, which tracks about 30 UK stocks that make all or most of their revenue at home, rose 1%. The index has gained more than 10% since September.

The FTSE 100 also inched 0.2% higher, helped by domestic banks such as Lloyds, and stocks considered most sensitive to any Brexit fallout such as housebuilders and consumer goods firms.

Any prospect of a rally among midcaps was quelled, as downbeat trading updates led pub operator Marston’s, industrial process furnace and ovens maker Vesuvius and engineering group Renishaw 8% to 10% lower.

Marston’s warned on its annual profit, while Vesuvius and Renishaw pointed to tough market conditions hitting their financials.

Indivior, whose shares have more than halved in value this year, jumped 12% after the drugmaker raised its annual sales and profit view.

However, Woodford Patient Capital Trust tumbled 7% to a fresh record low after the corporate director of money manager Neil Woodford’s suspended LF Woodford Equity Income Fund said the fund is to be wound up.

“The career of Neil Woodford as stock-picker par excellence has come to an ignominious end,” Markets.com analyst Neil Wilson said.

Europe

European stocks climbed to two-week highs on Tuesday, as investors cheered comments from the European Union’s chief Brexit negotiator that a deal with Britain over the terms of their divorce was still possible this week.

The pan-European STOXX 600 index rose 0.5% in early deals with Londonand Dublin-listed stocks leading gains and all but one of the 21 European industry subsectors rising.

Retail company shares rose 1.2% to their highest level since May, while travel and leisure gained 1.1% to hit a one-year high.

A 0.3% gain in the UK focused FTSE 250 midcaps index was aided by a 5.8% rise in recruiter Hays Plc after it reported steady first-quarter net fees due to strong hiring in the United States and China.

Dublin’s ISEQ, typically sensitive to Brexit news, advanced 1.2%.

Among individual movers, shares in Wirecard slumped 15.8% after the Financial Times published documents on the company’s accounting practices alleging an effort to inflate sales and profits, dealers said.

Shares of Dutch semiconductor equipment maker ASML gained 1.3% after reports that South Korea’s Samsung is agreeing to buy high-end lithography machines from the company.

The focus now turns to the United States where lenders JP Morgan, Citigroup, Goldman Sachs and Wells Fargo kick off third quarter earnings season in earnest later in the day.

Asia

Shares were mostly higher in Asia on Tuesday after a wobbly day of trading on Wall Street.

Japan’s Nikkei 225 index jumped 1.9% to 22,207.21 as Tokyo reopened from a public holiday and investors caught up on the news of a preliminary trade deal between China and the US struck Friday in Washington.

Oil

Oil prices steadied on Tuesday after two days of losses amid US-China trade talks which have investors on edge, but OPEC said it hoped to balance markets beyond 2020 in a sign of possible further supply curbs.

Brent crude fell 4 cents, or 0.07%, to $59.31 a barrel by 1230 GMT, while US West Texas Intermediate (WTI) crude dropped 15 cents, or 0.28%, to $53.44.

The National Bureau of Statistics (NBS) reported on Tuesday that China’s factory gate prices declined at the fastest pace in more than three years in September. That followed customs data on Monday that showed Chinese imports had contracted for a fifth straight month.

The US-China trade dispute also continued to cast a shadow on the global economy.

US President Donald Trump on Friday outlined the first phase of a deal to end the trade war with China and suspended a threatened tariff hike, however an agreement has remained elusive and questions loom over future oil demand.

Providing some support, OPEC Secretary-General Mohammad Barkindo said on Tuesday the Organization of the Petroleum Exporting Countries and its allies “will do whatever (is) in its power” to sustain oil market stability beyond 2020.

OPEC, Russia and other producers have since January implemented a deal to cut oil output by 1.2 million bpd to support the market.

RBC Capital Markets on Tuesday lowered its 2020 price outlook for both benchmarks by several dollars, citing volatility which undermines the “market’s ability to accurately reflect the fundamental backdrop”.

WTI crude is expected to average $58 and Brent $63.50 for the year, it said.

Currencies

The dollar gained for a second consecutive day on Tuesday as fading optimism over the latest China-US trade truce prompted traders to buy the greenback after a selloff last week.

The combination of some tepid US data and hopes of a breakthrough in a protracted trade conflict between Washington and Beijing prompted funds to unwind some of their dollar long bets recently, putting the US currency under selling pressure.

Against a broad basket of its rivals, the dollar was up 0.13% to 98.583 and around 1% away from a near 2-1/2 year high of 99.667 hit earlier this month.

Fading hopes over a trade deal also pulled the Chinese currency lower. China’s yuan slipped in offshore markets, a day after reaching a one-month high. The offshore yuan traded at 7.087 against the dollar, off Monday’s high of 7.051. Elsewhere, sterling trimmed some of its earlier gains as officials raced to put a Brexit deal in place.

The pound was up 0.5% at $1.267, trimming some of its gains after being up nearly 0.7% in early London trading.

Though a monthly survey showed the mood among German investors worsened less in October than expectations, the euro failed to get much of a boost from the data with the single currency down 0.33% at $1.10.