Dollar strengthens after Fed chair remarks; equities gain

Oil steadies as focus turns to surplus from shortage

NEW YORK, July 17, (Agencies): The US dollar rose on Tuesday against a basket of major currencies following an upbeat economic assessment from the head of the US Federal Reserve, while world stocks climbed as a heavy week of corporate earnings also kicked into gear.

Wall Street’s main indexes erased losses from the start of the session to trade solidly positive.

In written testimony, Fed Chairman Jerome Powell said the economy was on the cusp of “several years” of the job market remaining strong and inflation remaining around the Fed’s 2 percent target.

The US dollar pared gains immediately following the release of the testimony, but then quickly bounced back and added to gains.

The Dow Jones Industrial Average rose 63.79 points, or 0.25 percent, to 25,128.15, the S&P 500 gained 12.88 points, or 0.46 percent, to 2,811.31 and the Nasdaq Composite added 50.77 points, or 0.65 percent, to 7,856.49.

As a busy week of corporate earnings began, Netflix Inc shares dropped 4.9 percent after the company’s subscriber growth fell short of Wall Street expectations, while Johnson & Johnson shares gained 3.5 percent, boosting the S&P 500 and the Dow industrials, after the healthcare company’s results topped estimates.

The pan-European FTSEurofirst 300 index rose 0.26 percent, helped by Powell’s testimony amid a batch of mixed company updates.

MSCI’s gauge of stocks across the globe gained 0.20 percent.

The dollar index, tracking it against a basket of major currencies, rose 0.52 percent, with the euro down 0.47 percent to $1.1654.

US Treasury yields rose, with the two-year yield hovering near a decade high, as Powell’s comments supported traders’ view of further rate increases from the US central bank.

Benchmark 10-year notes last fell 1/32 in price to yield 2.86 percent, from 2.856 percent late on Monday.

Oil prices steadied after steep falls on Monday as worries over supply disruptions eased and the focus moved to increasing production and potential damage to global growth from the US-China trade dispute.

US crude rose 0.29 percent to $68.26 per barrel and Brent was last at $72.43, up 0.82 percent on the day.

US

US stock indexes rose on Tuesday after Federal Reserve Chairman Jerome Powell gave a robust view of the US economy and strong earnings from healthcare gaint Johnson & Johnson reinforced expectations of a solid earnings season.

Powell, discounting the risk that a trade war may derail a global recovery, said the US economy had “several years” of strong jobs and low inflation ahead, and that stable growth may continue if the Fed makes correct policy decisions.

Powell’s comments come as investors look for sustainability of earnings growth in quarterly reports of companies in the face of escalating US-China trade dispute.

The earnings of S&P 500 companies are estimated to have surged around 21 percent in the second quarter, according to Thomson Reuters I/B/E/S.

Johnson & Johnson rose 3.6 percent, giving the biggest boost to the S&P and the Dow Industrials, after the company beat quarterly profit estimates on strong sales of pharmaceuticals.

Netflix was down 5.4 percent, pulling back from a drop of as much as 14.1 percent after its quarterly subscriber growth missed expectations. The stock, the second-biggest S&P gainer this year, was the biggest drag on the benchmark index and Nasdaq.

At 13:01 pm EDT the Dow Jones Industrial Average was up 66.85 points, or 0.27 percent, at 25,131.21, the S&P 500 was up 12.28 points, or 0.44 percent, at 2,810.71 and the Nasdaq Composite was up 43.33 points, or 0.56 percent, at 7,849.05.

The Nasdaq’s gains were powered by Facebook, Google-Parent Alphabet and Amazon.com hitting record highs.

Ten of the 11 major S&P sectors were higher, led by the materials index’s 1.3 percent gain.

UnitedHealth dropped 2.6 percent after it topped profit estimates but its medical costs were slightly higher than expected. The stock was the biggest drag on the Dow and weighed on other health insurers.

Goldman Sachs fell 1.2 percent as its trading results were weaker than some rivals and analysts said the better-than-expected profit was due to low-profile businesses. Advancing issues outnumbered decliners by a 1.52-to-1 ratio on the NYSE and by a 1.65-to-1 ratio on the Nasdaq.

The S&P index recorded 18 new 52-week highs and one new low, while the Nasdaq recorded 64 new highs and 40 new lows.

Europe

European shares rose on Tuesday in a choppy session, as stocks were buoyed by upbeat comments in Federal Reserve Chairman Jerome Powell’s testimony amid a batch of mixed company updates.

Telecoms stocks fell the most, down 1.2 percent, weighed down by a 4 percent drop in Telenor after the Norwegian telecoms operator posted secondquarter results that lagged forecasts.

The declines were offset by strength in banks and a rebound in mining stocks.

The pan-European STOXX 600 index was up 0.2 percent at its close. Earlier losses turned to gains following Powell’s testimony, in which the Fed chairman said that he saw “several years” of strength in the jobs market and low inflation.

Powell’s testimony sent the dollar higher, putting pressure on the euro, which in turn helped the German exporter-heavy DAX index to outperform. It ended 0.9 percent higher.

Eyes were also on the secondquarter earnings season.

Husqvarna fell the most on the STOXX, 17.4 percent, after the world’s biggest maker of outdoor power tools posted an unexpected drop in operating profit. Its CEO told Reuters that it expected a negative effect from tariffs in 2018 and a bigger impact in 2019.

Banks, buoyed in the previous session by better-than-expected earnings from Deutsche Bank, declined. SEB gained 4.3 percent after net interest income at the Swedish bank beat forecasts thanks to strong corporate demand.

Positive updates also lifted shares in French supermarket retailer Casino, Norwegian media group Schibsted and Swedish medical technology group Getinge , which rose 3.2 percent, 12.6 percent and 10.5 percent respectively.

Thyssenkrupp jumped more than 9 percent after Chairman Ulrich Lehner quit, raising hopes of a restructuring at the German conglomerate.

Elsewhere, dealmaking activity drove share price moves.

Swedish telecom operator Telia fell more than 4 percent after agreeing to buy TDC’s Norwegian business. Italian TV group Mediaset added 3.5 percent after it made a joint bid for tower company EI Towers.

EI Towers soared 15.1 percent.

Asia

Energy firms led a sell-off in most Asian equity markets on Tuesday, a day after supply fears sent oil prices plunging, while confidence remains fragile owing to ongoing fears of a global trade war.

Oil edged up slightly Tuesday but was unable to make inroads in the previous day’s losses of more than four percent.

The losses filtered through to energy firms with CNOOC off more than three percent and PetroChina 2.8 percent down in Hong Kong, while Woodside Petroleum was more than two percent lower in Sydney and Tokyo-listed Inpex lost more than one percent.

Broader stock markets were also mostly down with Hong Kong 1.3 percent lower, Shanghai 0.6 percent off and Sydney 0.6 percent lower. There were also losses for Seoul, Wellington and Taipei.

However, Tokyo — which was closed for a holiday Monday — ended 0.4 percent higher thanks to a weaker yen and Singapore edged up 0.1 percent.

Key figures at 0810 GMT Tokyo — Nikkei 225: Up 0.4 percent at 22,697.36 (close)

Hong Kong — Hang Seng: Down 1.3 percent at 28,181.68 (close)

Shanghai — Composite: Down 0.6 percent at 2,798.31 (close)

Dollar/yen: Up at 112.40 yen from 112.27 yen at 2100 GMT

Oil

Global benchmark Brent crude oil hit a three-month low on Tuesday as worries over supply disruptions eased and the focus moved to increasing production and potential damage to global growth from the US-China trade dispute.

Benchmark Brent crude oil fell 49 cents to an intraday low of $71.35 a barrel, its lowest since April 17, before recovering to around $71.74, down 10 cents, by 1330 GMT. Brent fell 4.6 percent on Monday.

US light crude was 80 cents lower at $67.26 a barrel. It lost 4.2 percent on Monday.

Oil prices have fallen by almost 10 percent over the last week as crude export terminals in Libya have reopened and exports from other OPEC countries and Russia have increased.

Gold

Gold hit its lowest in a year on Tuesday as the dollar steadied and most other markets were subdued before Federal Reserve Chair Jerome Powell testifies to the US Congress.

The dollar held steady below a one-year high on Tuesday as traders awaited Powell’s testimony for clues on the future rate outlook as well as risks from trade conflicts. The greenback has put in a solid performance this year amid the trade disputes.

A strong dollar tends to weigh on gold by making the dollar-priced metal costlier for non-US investors.

Spot gold was down 0.7 percent at $1,231.89 an ounce at 1329 GMT, having hit its lowest since last July at $1,230.40 The precious metal is down some 5 percent for the year.

US gold futures for August delivery were down 0.8 percent at $1,231.80 an ounce.