Strong growth data backs euro rally; Wall Street creeps higher

Oil dips below $54 on Trump budget proposals

NEW YORK, May 23, (Agencies): Shares climbed across the euro zone on Tuesday after data showed robust growth, and Wall Street ticked higher as a US federal budget proposal called for slashing healthcare programs and boosting military spending.

Businesses across the euro zone were on their strongest run since 2011, according to IHS Markit’s Flash Composite Purchasing Managers’ Index for May. It matched the previous month’s 56.8, its highest since April 2011. A reading above 50 indicates growth.

“It’s a very good result and it’s broadbased. We’ve got a good pace of growth here. The fact we have maintained this high level in May is great news for second-quarter GDP,” said Chris Williamson, chief business economist at IHS Markit.

The pan-European FTSEurofirst 300 index rose 0.29 percent and MSCI’s gauge of stocks across the globe gained 0.14 percent.

The euro had hit a six-month high but retreated as traders locked in some of this month’s 3.5 percent surge, while a suicide bombing in Britain subdued the pound after more signs of a drop in the UK economy dented it.

“Increasingly the markets are just more and more numb to these. As bad as they are and as horrific as they are, the market immediately looks through these things and uses these as buying opportunities more than anything else,” said Brad Bechtel, managing director FX at Jefferies in New York.

In the United States, investors looked to President Donald Trump’s first full budget plan, released on Tuesday.

The Dow Jones Industrial Average rose 37.26 points, or 0.18 percent, to 20,932.09, the S&P 500 gained 3.21 points, or 0.13 percent, to 2,397.23 and the Nasdaq Composite dropped 1.83 points, or 0.03 percent, to 6,131.79.

Trump’s budget in its current form is unlikely to be approved by Congress, which will craft its own tax and spending plans.

However, the plan’s proposal to sell off half of strategic US oil reserves weighed on crude futures, offsetting optimism over expectations that other major oil producers would agree to extend supply curbs this week.

Oil prices bounced around on Tuesday. US crude rose 0.1 percent to $51.18 per barrel and Brent was last at $53.94, up 0.13 percent on the day at 1500 GMT.

In Greece, short-dated government bond yields rose sharply and banking stocks fell after euro zone finance ministers failed to agree debt relief for Greece with the International Monetary Fund and did not release new loans to Athens.

Emerging market stocks rose 0.07 percent. MSCI’s broadest index of AsiaPacific shares outside Japan fell 0.25 percent, while Japan’s Nikkei lost 0.33 percent.

The dollar index against a basket of currencies rose 0.01 percent. The Japanese yen strengthened 0.19 percent versus the greenback at 111.12 per dollar, while sterling was last trading at $1.2977, down 0.16 percent on the day.

US

Wall Street edged higher in early afternoon on Tuesday, but stayed in a tight trading range, as a boost from financial stocks was tempered by a drop in consumer discretionary and tech stocks.

The S&P 500 briefly topped 2,400 points for the first time since the markets’ plunged last Wednesday. Since then, the three major indexes have risen for three straight session. But that recovery stuttered on Tuesday as investors assessed the details of President Donald Trump’s first full budget plan as well as some weak economic data.

At 12:38 pm ET (1638 GMT) the Dow Jones Industrial Average was up 34.06 points, or 0.16 percent, at 20,928.89, the S&P 500 was up 4.36 points, or 0.18 percent, at 2,398.38 and the Nasdaq Composite was down 1.09 points, or 0.02 percent, at 6,132.53.

The market also seemed to have shrugged off news of a suicide attack in Britain. US futures had slipped slightly on Monday evening, before recovering, on news of the attack that killed 22 people and wounded many more at a pop concert in the English city of Manchester.

Eight of the 11 major S&P 500 sectors were higher, with the utilities and financials leading the gainers.

Goldman Sachs and JPMorgan provided the biggest boost to the Dow and S&P.

Apple and Facebook dragged on the Nasdaq.

Consumer discretionary was the biggest laggard with a 0.28 percent drop, as auto part retailers weighed.

Autozone fell 8.3 percent to $604.98 after the auto part retailer’s quarterly results came in below expectations. Advance Auto Parts, O’Reilly Automotive and Genuine Parts were down between 1.6 percent and 2.9 percent.

Advancing issues outnumbered decliners on the NYSE by 1,770 to 1,042. On the Nasdaq, 1,418 issues rose and 1,339 fell.

The S&P 500 index showed 47 new 52-week highs and seven new lows, while the Nasdaq recorded 73 new highs and 46 new lows.

Europe

Nokia shares jumped more than 6 percent on Tuesday to their highest in more than a year, joined by a rise in banking stocks which helped European stock markets edge higher.

The pan-European STOXX 600 index ended up 0.2 percent, gaining pace after a sluggish opening as banking stocks headed higher. Germany’s DAX was up 0.3 percent while euro zone blue chips gained 0.5 percent.

European tech firms were standout performers, with the sector up 1.4 percent after shares in Nokia jumped 6.4 percent to their highest since February 2016 following the settlement of a patent dispute with Apple .

Upgrades also helped the top STOXX gainers, with Banco BPM rising 5.9 percent after Barclays upgraded the Italian lender to “overweight” from “equal weight”.

Analysts at Barclays cited Banco BPM’s attractive valuation compared to Italian peers as well as progress with its portfolio of bad loans.

“Banco BPM has much work to do reducing its NPLs and also raising its coverage ... yet management has made a good start in 1Q17,” analysts at Barclays said in a note, referring to Banco BPM’s non-performing loans.

Overall banking stocks gained 0.8 percent, with shares in Spanish banks Banco de Sabadell, Santander and BBVA regaining losses from the previous session when they were hit by political worries after Spain’s Socialists re-elected hardliner Pedro Sanchez. Spain’s IBEX gained 1.1 percent. Among other regional benchmarks, Greece’s ATG index fell after euro zone finance ministers failed to agree debt relief for Athens with the International Monetary Fund and did not release new loans. In Britain, the FTSE 100 ended down 0.15 percent. Campaigning ahead of the June 8 general election was suspended after at least 22 people, including some children, were killed in a suicide bomb attack in Manchester overnight.

Asia

Asian markets mostly turned lower Tuesday as profit-taking overshadoweda healthy lead from Wall Street, while the pound fell after 22 people were killed in a terror blast in Manchester.

Markets were hammered in the middle of last week on fears about Trump’s economy-boosting agenda, with his presidency engulfed in a crisis over his firing of FBI chief James Comey and allegations he disclosed sensitive intelligence to Russian officials.

Hong Kong closed up 0.1 percent, Shanghai slipped 0.5 percent and Sydney eased 0.2 percent while Tokyo ended 0.3 percent down. However, Seoul and Singapore each added 0.3 percent. Key figures around 0820 GMT Tokyo — Nikkei 225: DOWN 0.3 percent at 19,613.28 (close)

Hong Kong — Hang Seng: UP 0.1 percent at 25,403.15 (close)

Shanghai — Composite: DOWN 0.5 percent at 3,061.95 (close)

Oil

Oil rose on Tuesday as expectations of an extension to OPEC-led supply cuts supported prices, reversing losses earlier in the session after a White House proposal suggested selling off half the country’s huge oil stockpile.

Brent crude traded up 7 cents at $53.94 per barrel at 1348 GMT, after a low of $53.20.

US light crude was up 10 cents at $51.23.

The Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers including Russia meet on May 25. They are expected to extend a pledge to cut output by 1.8 million barrels per day (bpd), possibly until March 2018.

The cuts were initially agreed to last six months until the end of June.

Kuwaiti Oil Minister Essam al-Marzouq said on Tuesday not all OPEC countries and its allies supported a ninemonth extension and producers would discuss this week whether to extend output cuts by a six or nine months.

But other delegates told Reuters they predicted a smooth meeting with a ninemonth extension likely to be agreed.

“OPEC meets on Thursday amid increasing optimism that the production cuts agreed last November will be rolled over and most likely to the end of 1Q18,” Colin Smith, analyst at Panmure, said in a note on Tuesday, adding he expected a rollover would “likely deliver a significant tightening of the market.”

Earlier in the session oil prices dropped on the White House plan to sell off half of the nation’s 688 million-barrel oil stockpile from 2018 to 2027 aims to raise $16.5 billion and help balance the budget.

The budget, to be delivered to Congress on Tuesday, is only a proposal and may not take effect in its current form.

Gold

Gold prices were little changed on Tuesday as the dollar steadied near 6-1/2 month lows and traders locked in profits after two weeks of gains, shrugging off heightened political risk following a deadly suicide attack in Britain.

The blast, which killed at least 22 people, weighed on sterling versus the dollar , but the US currency was flat against a currency basket after recent sharp falls, leaving little to prompt investors to bet bullion higher. “Gold is taking a breather once again; it’s struggling to make it out of this $1,245-$1,265 range,” said Ole Hansen, head of commodities strategy at Saxo Bank. “Unless we get other developing (political risk) stories, the market is not prepared to break this range until further guidance from the Federal Open Market Committee.”

Spot gold edged up 0.2 percent to $1,262.10 an ounce by 1211 GMT, having gained about 3.6 percent since May 9, while US gold futures were up 0.1 percent at $1,262.

The safe-haven metal, also seen as an alternative currency to the US dollar, has been supported by weakening US economic data and troubles facing US President Donald Trump, all of which have weighed on the greenback.

The dollar is down by about 7 percent this year, reversing all the gains made after Trump’s election win in November.

Still, Federal Reserve fund futures were up, showing a 75 percent chance of a June increase to interest rates and deterring investors from pushing gold higher until further word from the Fed on the the prospects for rates this year.