Dow, S&P 500 hit record highs on greater risk tolerance; oil up
Europe, Asia stocks soar again; gold falls
NEW YORK, July 12, (Agencies): The US S&P 500 and Dow Jones industrial average stock indexes set record intraday highs on Tuesday after reduced global political tensions and upbeat corporate results from Alcoa boosted risk appetite, while European shares also rallied.
The benchmark S&P 500 hit 2,151.96, topping Monday’s intraday record high by about 8 points, while the Dow rose to 18,353.76 to top its previous record intraday high touched in May 2015. The tech-heavy Nasdaq Composite also gained, wiping out its losses for the year.
Increasing prospects of global economic health boosted shares, while Alcoa reported a smaller-than-expected drop in quarterly profit, sending the aluminum producer’s shares up more than 4 percent and helping boost optimism about the earnings season.
Investors’ appetite for equities has increased after robust economic data, including a stronger-than-expected US jobs report for June last Friday, and low yields on government bonds. Easing political tensions in Britain and Japan have reduced some global uncertainties.
The STOXX Europe 600 was up for a fourth straight session after posting its highest close on Monday since Britain voted to leave the European Union on June 23. Gains in shares of Italian banks helped fuel the rise, with unicredit last up more than 13 percent.
“What is driving the market today is political stability in both Japan and the UK and a global drive for yield, which central banks are going to support,” said John Brady, a senior vice president at R.J. O’Brien & Associates in Chicago.
MSCI’s all-country world equity index was last up 0.83 percent at 408.24.
The Dow Jones industrial average was last up 87.46 points, or 0.48 percent, at 18,314.39. The S&P 500 was up 11.55 points, or 0.54 percent, at 2,148.71. The Nasdaq Composite was up 30.74 points, or 0.62 percent, at 5,019.38.
Europe’s broad ftseurofirst 300 index was last up 0.97 percent, at 1,328.27.
Safe-haven assets such as US Treasuries, the Japanese yen and gold fell in price. Benchmark 10-year Treasury yields, which move inversely to prices, hit a 1-1/2-week high of 1.503 percent earlier.
Yields rose as expectations of new stimulus in Japan boosted stocks and reduced demand for safe haven bonds, and ahead of the Treasury Department’s auction of $20 billion in 10-year notes.
“Some of the uncertainty, ‘flight-to quality’ type of unknown bid is leaving the markets,” said Tom Tucci, head of Treasuries trading at CIBC in New York.
The US dollar hit its highest level in more than two weeks against the yen of 104.65 yen on the global risk appetite and anticipation of more Japanese stimulus. The euro was last 0.3 percent higher against the dollar, however, at $1.1087. Gold fell for a second straight day.
Crude futures bounced back from twomonth lows, helped by a weaker dollar, but an oil inventory glut and a drop in bullish bets by investors weighed on prices.
Brent crude was last up $1.20 at $47.45 a barrel. US crude was last up $1.01 at $45.77 per barrel.
US
The S&P 500 and the Dow hit record intraday highs on Tuesday, while the Nasdaq turned positive for the first time this year, buoyed by rising prospects of global economic health and with Alcoa getting the US earnings season off to a promising start.
The S&P 500 hit 2,155.32, breaking past its previous record on Monday. The Dow hit an all-time high of 18,360.51.
Alcoa’s quarterly profit fell less than expected, sending the aluminum producer’s shares to a five-month high of $10.67 and helping boost optimism about the earnings season.
Strong economic data and low returns on government bonds along with easing political tensions in Britain and Japan have reduced some global uncertainties and boosted investor appetite for equities.
While profits of S&P 500 companies are estimated to have fallen 5 percent in the second quarter, mirroring the first, analysts see a return to growth throughout the second half of the year, according to Thomson Reuters data.
At 12:23 pm ET the Dow Jones industrial average was up 128.78 points, or 0.71 percent, at 18,355.71.
The S&P 500 was up 17.16 points, or 0.8 percent, at 2,154.32.
The Nasdaq Composite was up 40.59 points, or 0.81 percent, at 5,029.23.
Among the 10 major S&P sectors, the traditionally defensive sectors, utilities, telecoms and consumer staples fell. The three indexes have risen in double-digit percentages this year.
Oil’s bounce off a two-month low boosted materials and energy shares.
Strong corporate reports, along with low expectations for a hike in interest rates anytime soon, should keep the momentum in the market going.
United Continental jumped 7 percent after saying its quarterly passenger unit revenue would drop less than expected. The outlook also boost other airlines 3-9 percent. Amazon.com hit a record high of $757.34 before slipping 0.6 percent. The retailer said it resolved a glitch some customers experienced at its “Prime Day” shopping event.
EU
European shares rose on Tuesday, with Italian bank stocks outperforming on expectations of measures to tackle their bad debts, while better earnings also helped carmakers’ shares.
The pan-European STOXX Europe 600 index and the similar ftseurofirst 300 index both rose 1.1 percent, marking out their fourth straight day of gains.
Autos and banks were among the top gainers, up 3.8 percent and 3.3 percent respectively.
Carmaker Daimler rose 4.4 percent after second quarter results beat expectations, helped by higher earnings in van and bus operations.
Italian bank unicredit surged 13.5 percent, the top STOXX 600 riser, after it successfully placed 10 percent of its online broker Fine co Bank at 5.40 euros per share, pocketing 328 million euros ($363 million).
Other Italian bank stocks also rose sharply.
Even though the International Monetary Fund cut its growth forecast on Italy, the country’s banking stocks rose on expectations that Italy would reach a deal to safeguard its banks, which are struggling with bad debts.
However, Norwegian bank DNB fell 7.6 percent after warning of bigger loan losses this year and reporting higher-than-expected Q2 impairments due to a slump in Norway’s key oil sector.
Asia
Tokyo stocks soared again Tuesday to lead another Asia-wide markets rally fuelled by hopes of fresh central bank stimulus and following last week’s blockbuster US jobs report.
The gains extended a global advance that saw the S&P 500 on Wall Street close at a record high for the first time in 14 months.
They also suggest investor fears over Britain’s shock European Union exit vote last month have been allayed by promises of central bank help.
The Nikkei index ended up 2.5 percent, adding to the four percent surge clocked up Monday as the yen retreated against the dollar following a huge win for Japanese Prime Minister Shinzo Abe’s coalition in weekend elections. Abe said Monday his government would draw up new measures, Japanese media reported, in his latest push to kickstart the torpid economy.
The package could be worth around 10 trillion yen ($97 billion), according to reports, which earlier said the amount could be double that figure.
“US shares have started the week on a good note, and the risk-on (sentiment) is continuing,” Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News. “It’s leading to higher share prices.” Talk of fresh Japanese easing measures helped push the dollar up to 103.30 yen from 102.82 yen in New York. The fall in the yen provided much-needed support for Japan’s exporters after the currency surged in response to the Brexit vote as traders sought out low-risk investments.
Once again Nintendo soared, adding 12.73 percent as its new smartphone game Pokemon GO tops gaming charts and racks up millions of buyers. The firm is up nearly 60 percent since Thursday with billions added to its market value.
Other regional markets also climbed for a second straight session, with Hong Kong ending up 1.7 percent in the afternoon and Shanghai closing 1.8 percent higher.
Sydney put on 0.3 percent, while Seoul, Singapore, Jakarta and Manila all posted healthy gains.
In early European trade London, Paris and Frankfurt each rose 0.2 percent.
The upbeat atmosphere also lent support to the under-pressure pound, which rose to $1.3090 from $1.2997 as dealers breathed a sigh of relief that Britain’s ruling Conservatives had a new leader to take over from David Cameron as prime minister.
Oil
Crude futures on Tuesday bounced back from two-month lows, helped by a weaker dollar, but an oil inventory glut and a drop in bullish bets by investors weighed on prices.
Brent crude was up $1.29 at $47.54 per barrel at 1218 GMT. US West Texas Intermediate crude was up $1.10 at $45.86 a barrel. OPEC cut its forecast for world economic growth this year citing increased uncertainty following Britain’s vote to leave the European Union and in its first 2017 forecast said the pace of oil demand growth would slip.
The Organization of the Petroleum Exporting Countries lowered its 2016 global economic growth forecast to 3.0 percent from 3.1 percent.
“Today’s rally, due in large part to the equity market, isn’t really supported by the fundamentals,” head of commodity strategy at ING Hamza Khan said.
Saudi Energy Minister Khalid al-Falih said on Tuesday the oil industry needed a price above $50 per barrel to sustain investment but added that downward pressure would prevail because of an inventory glut.
OPEC was upbeat about 2017 being the year when excess oil inventories will fall.
Oil prices fell to a two-month low on Monday on renewed fears of oversupply.
On Tuesday, commodity and stock prices rose as the dollar index dropped 0.4 percent. The British pound bounced back from a 31-year low amid easing political tensions in Britain and as hopes for stimulus measures boosted risk appetite.
On the downside, a Reuters poll showed that China’s economic growth likely cooled to a seven-year low in the second quarter as the industrial sector lost steam and a boost from financial services faded.
Gold
Gold fell for a second straight day on Tuesday as global equities rallied on easing political uncertainty in Britain and hopes for more economic stimulus, which in turn curbed demand for assets perceived as a safe haven.
Spot gold fell as much as 1.1 percent to $1,340.26 an ounce in earlier trade and was down 0.9 percent at $1,342.96 an ounce by 1434 GMT, after also losing around 1 percent on Monday.
“Tensions in Britain are easing for now, as the country will soon have a new prime minister,” Activ Trades chief analyst Carlo Alberto de Casa said.
Gold has gained about $100 an ounce since the United Kingdom voted to leave the European Union, with worried investors piling their cash into safe-haven assets.
However, Asian stocks hit a 2-1/2 month peak on Tuesday and European and US shares were on track for another day of gains on hopes of more stimulus from global policymakers.