Wall Street climbs on crude oil, strong earnings as dollar gains

Gold prices slip, seen re-testing low

NEW YORK, July 10, (Agencies): The S&P 500 stock index hit a fourmonth high on Tuesday, boosted by higher oil prices and strong earnings, while the US dollar rose against the safe-haven Japanese yen as investors bought riskier assets.

World share markets remained near three-week highs, supported by optimism about US company earnings and the notion that global economic growth can withstand trade tensions.

“The first major earnings report came out, and PepsiCo’s earnings beat expectations and that’s a good start for the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Energy shares were also lifted by oil prices, which rose due to growing supply outages as Norway shut one oilfield amid a worker strike and Libya said production fell by more than half in recent months.

Brent crude — up almost 20 percent this year — was last at $78.71, up 0.82 percent on the day. US crude rose 0.22 percent to $74.01 per barrel.

The Dow Jones Industrial Average rose 128.19 points, or 0.52 percent, to 24,904.78, the S&P 500 gained 7.66 points, or 0.28 percent, to 2,791.83 and the Nasdaq Composite added 11.46 points, or 0.15 percent, to 7,767.66.

Second-quarter US corporate results start in earnest this week and are expected to showcase earnings growth of over 20 percent across all sectors, thanks to recent tax cuts, high oil prices and robust economic growth.

The pan-European FTSEurofirst 300 index rose 0.41 percent and MSCI’s gauge of stocks across the globe gained 0.15 percent.

Investors have not forgotten about the underlying potential for an escalated trade war after China and the United States slapped tit-for-tat tariffs on $34 billion worth of each other’s goods. Even so, no fresh salvos have since been fired.

The risk-on sentiment nudged the US dollar toward a six-month high against the yen, with the greenback poised for a further boost if consumer price inflation figures come in higher than expected on Thursday.

The dollar index rose 0.15 percent, with the euro down 0.18 percent to $1.1728.

In Britain, sterling has been pressured by fears that cabinet resignations could lead to rebellion in the ruling party’s ranks, toppling Prime Minister Theresa May or triggering fresh elections.

US

US stocks rose on Tuesday, with the S&P 500 at a four-month high, as energy shares got a boost from higher crude prices and strong results from PepsiCo signaled a solid start to the earnings season.

PepsiCo’s shares surged 3.9 percent and were poised for their biggest oneday jump in nearly seven years after the company’s quarterly results topped estimates on strong sales of snacks.

The company also reaffirmed its full-year forecast amid signs of a gradual recovery in its soda business.

PepsiCo drove a 0.82 percent gain in the consumer staples index, with CocaCola rising 1 percent.

The energy index rose 0.62 percent as crude prices gained on growing supply disruptions in Norway and Libya, but gains were pared after the United States said it would consider requests for waivers from Iranian oil sanctions.

Shares of Exxon and Chevron were up around 1 percent each.

Overall, S&P 500 companies are expected to post second-quarter profit growth of around 21 percent, slightly higher than what was forecast in April, according to Thomson Reuters data.

However, investors and analysts will parse quarterly reports to gauge the impact of an escalating trade dispute between China and the United States on company earnings.

Wall Street rose for a fourth straight session. At 12:45 pm EDT, the S&P 500 was up 8.24 points, or 0.30 percent, at 2,792.45. The index reached a peak of 2,795.58, its highest since March 13.

The Dow Jones Industrial Average was up 137.75 points, or 0.56 percent, at 24,914.34 and the Nasdaq Composite was up 10.56 points, or 0.14 percent, at 7,766.76.

Ten of the 11 S&P sectors were higher, led by a 1.20 percent gain in the utilities sector. The lone laggard were financials, off 0.39 percent after a 2.3 percent surge on Monday.

JPMorgan Chase, Wells Fargo and Citigroup are scheduled to report results on Friday. Their shares fell between 0.3 and 1.3 percent.

Nordstrom dropped 4.5 percent, the most on the S&P, after the upscale department store operator issued a bleak sales forecast for the rest of 2018.

Cerner was the second-biggest loser on the S&P, falling 4.3 percent after Evercore ISI downgraded the stock to “underperform”.

Declining issues outnumbered advancers for a 1-to-1 ratio on the NYSE and a 1.37-to-1 ratio on the Nasdaq.

The S&P index recorded 28 new 52-week highs and no new lows, while the Nasdaq recorded 88 new highs and 18 new lows.

Europe

European shares edged higher on Tuesday as investors shifted from worrying about a trade war to focussing on a corporate earnings season expected to deliver solid results.

The pan-European STOXX 600 index rose 0.4 percent to a 2-1/2-week high, scoring its sixth straight day of gains as energy shares supported the market, while political bickering in the UK kept the FTSE, up 0.1 percent, slightly behind.

Fading concern over trade helped push Wall Street higher for a second day on Tuesday.

Oil stocks were the biggest boost to the STOXX index, rising 1.4 percent. Crude prices climbed on concern over potential supply shortages as Norwegian oil workers prepared to strike later in the day.

Industrials stocks like Siemens, Deutsche Post and Safran, among the worst-hit by news of tariffs, also boosted the European index. Trade-sensitive luxury stocks Kering and LVMH extended their recovery rally.

Analysts have been revising their earnings expectations higher for the STOXX 600 before Europe’s earnings season kicks off in earnest. According to Thomson Reuters IBES data, STOXX earnings are expected to have risen more than 7 percent.

On Tuesday however disappointing results caused the most eye-catching moves.

Shares in interdealer broker TP ICAP sank 35.9 percent to a two-year low, suffering their worst day ever. The company announced its CEO would depart and warned on profit, blaming Brexit-related costs.

Airbus shares rose 4 percent after Bank of America Merrill-Lynch added the stock to its “Europe 1” list of preferred stocks.

Ocado shares ended up 9 percent, despite the online supermarket saying its 2018 pre-tax loss would exceed market consensus as investment spending cut into first-half earnings. Earlier in the day, the share price initially fell as much as 7.4 percent after the earnings report.

Among other gainers, speciality chemicals firm Wacker Chemie rose 3.8 percent after Societe Generale analysts raised the stock to buy from hold.

Shares in German wind turbine maker Nordex jumped 4.5 percent after it won its biggest single contract ever, for a 595-megawatt wind turbine order in Brazil.

Biotech and pharma shares rose 0.7 percent as M&A and drug trial results boosted some small caps in the sector.

UK specialist healthcare services company Cambian soared 34 percent after the small-cap firm said it had received a $536 million takeover offer from Caretech Holdings.

Asia

Asian markets mostly rose on Tuesday following another strong lead from New York, as optimism about the US economy and the beginning of the earnings season provide a distraction from trade tensions.

The positive sentiment and US economic optimism has lifted the dollar against the safe haven yen, helping Tokyo’s Nikkei end 0.7 percent higher.

Shanghai added 0.4 percent and Singapore one percent. Seoul gained 0.4 percent, Taipei edged 0.3 percent higher, while Manila and Jakarta were also well up. Hong Kong pared early gains to end flat after a two-day advance.

Key figures around 0810 GMT Tokyo — Nikkei 225: Up 0.7 percent at 22,196.89 (close)

Hong Kong — Hang Seng: Flat at 28,682.25 (close)

Shanghai — Composite: Up 0.4 percent at 2,827.63 (close)

Dollar/yen: Up at 111.05 yen from 110.82 yen

Oil

Oil prices rose by over 1 percent towards $79 per barrel on Tuesday due to growing supply outages, with Norway shutting one oilfield as hundreds of workers began a strike and Libya saying its production more than halved in recent months.

The disruptions add to supply worries around the world. Venezuela’s production has collapsed due to a lack of investment and Iranian exports have suffered due to U.S sanctions. OPEC has little capacity to fill the gap as demand for oil quickens.

Benchmark Brent oil futures rose by 96 cents, or 1.2 percent, to $79.03 per barrel by 1147 GMT. They earlier hit an intraday high of $79.29. Brent gained 1.2 percent on Monday.

US light crude futures were up 35 cents, or 0.5 percent, at $74.20.

Mounting supply concerns could push Brent above $85 per barrel, MUFG Bank said in a note.

“Renewed geopolitical supply-side disruptions stemming from Canada, Iran, Libya, Venezuela and the US raise the likelihood of oil trade interruptions and with it upside risks to oil prices in the near term,” MUFG said.

Hundreds of workers on Norwegian offshore oil and gas rigs went on strike on Tuesday after rejecting a proposed wage deal, leading to the shutdown of one Shell-operated oilfield.

Gold

Gold headed lower on Tuesday, weighed down by a stronger dollar, and may re-test a seven-month low after a failed attempt to break higher in the previous session.

Spot gold was down 0.4 percent at $1,253 an ounce by 1405 GMT, after retreating from its highest since June 26 at $1,265.87 in the previous session.

US gold futures for August delivery slipped 0.5 percent to $1,253.70 an ounce.

“If this dollar strength continues, we could see another test of $1,240, the lows from last week and mid-December, a crucial technical level,” said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.