Global stocks climb on hopes for ‘progress’ in trade; sterling gains

Pound holds near $1.30 as Brexit deal vote blocked

NEW YORK, Oct 21, (RTRS): Shares on world stock indexes mostly rose on Monday, as hopes for resolving the US-China trade war pushed investors toward riskier assets, while the pound was near a 5-1/2-month high.

The British parliament’s speaker refused to allow a vote on Prime Minister Boris Johnson’s Brexit divorce deal, suggesting Johnson faces further problems in the Brexit ratification.

MSCI’s world equity index, which tracks shares in 47 countries, gained 0.6%. The Euro STOXX 600 added 0.7%, while the S&P 500 index was up 0.5%.

Investors in Asia earlier were boosted by comments on Friday by Chinese Vice Premier Liu He that Beijing will collaborate with the United States to address mutual concerns on the trade war.

US President Donald Trump had also struck an optimistic tone on Friday, saying he thought a trade deal would be signed before an Asia-Pacific Economic Cooperation meeting in Chile next month.

On Wall Street, the Dow Jones Industrial Average rose 23 points, or 0.09%, to 26,793.2, the S&P 500 gained 15.29 points, or 0.51%, to 3,001.49 and the Nasdaq Composite added 60.40 points, or 0.75%, to 8,149.95.

The dollar was heading toward its worst month since January 2018 amid sterling’s gain.

Against the dollar, sterling was last up 0.1% in North American trade, having earlier broken above $1.30 for the first time in 5-1/2 months. The euro was 0.18% higher against the dollar, having also been lifted by Brexit optimism this month by 2.23%.

In the US bond market, benchmark 10-year notes last fell 11/32 in price to yield 1.787%, from 1.75% late on Friday.

In commodities, US crude fell 1.1% to $53.19 per barrel and Brent was last at $58.60, down 1.38% on the day.

US

Wall Street rose on Monday on signs of progress in resolving the prolonged US-China trade war, while a second straight session of declines for Boeing pressured the blue-chip Dow index.

White House adviser Larry Kudlow said tariffs scheduled for December could be withdrawn if talks go well, adding to optimism after China said it will work with the United States to address each other’s core concerns.

Trade-sensitive technology stocks gained 0.8%, while the Philadelphia Semiconductor index climbed 1.6% on gains in US chipmakers with a large exposure to China.

A 1.2% gain in financial stocks also propped up the S&P 500 index. Big banks posted largely upbeat quarterly results last week in a strong start to the earnings season.

Shares of Boeing Co were on track for their worst two-day fall in over a decade as multiple brokerages downgraded the stock following reports that call into question the timing of the grounded 737 MAX jet’s return to service.

The planemaker maker’s shares fell 3.4%.

Signs of progress in trade talks have helped Wall Street recover from a rough start to the month. The benchmark S&P 500 index ended Friday with its second weekly gain, while the Nasdaq rose for the third week in a row.

At 11:09 a.m. ET, the Dow Jones Industrial Average was up 32.84 points, or 0.12%, at 26,803.04, the S&P 500 was up 15.58 points, or 0.52%, at 3,001.78. The Nasdaq Composite was up 59.37 points, or 0.73%, at 8,148.91.

Investors are now gearing up for earnings reports this week from high-profile companies including Boeing, Microsoft Corp, Procter & Gamble Co, United Parcel Service Inc and Caterpillar Inc.

Analysts have projected the first earnings contraction since 2016 for S&P 500 companies, but of the 75 companies that have reported results so far, only 12% have come in below estimates, according to Refinitiv data.

Halliburton Co gained 6.3%, reversing earlier losses, after the oilfield services provider detailed plans of further cost reductions.

Coty Inc was the biggest gainer among S&P 500 companies after the cosmetics maker said it was planning to sell its professional beauty business that houses brands such as Wella and OPI.

Cardinal Health Inc, McKesson Corp and AmerisourceBergen Corp led declines on the benchmark index.

UK

UK midcaps closed the session with modest gains on Monday on hopes that a no-deal Brexit will be avoided, even though uncertainties persisted as lawmakers forced Prime Minister Boris Johnson to seek another extension from the European Union.

The domestically focused FTSE 250 added 0.4% on Monday, while the exporter-heavy FTSE 100 edged 0.2% higher, lagging its European counterpart as the pound strengthened.

A 9% plunge in medical device maker Smith+Nephew after its CEO departed also capped gains.

In a parliamentary showdown on Saturday, lawmakers voted in favour of an amendment exposing an unwilling Johnson to having to ask the European Union for a delay to the Brexit deadline and withheld support for the last-minute divorce deal.

Markets, however, looked past the political chaos to the fact that an extension to Brexit meant any near-term risk of a disruptive no-deal departure will be eliminated.

As a result, companies considered most vulnerable to any hit to the UK economy advanced. Banking group Lloyds, housebuilder Taylor Wimpey and Royal Bank of Scotland added between 2% and 2.2%.

The FTSE 250 has gained nearly 4% over the last two weeks, handily outperforming blue chips, as investors had bet that a long drawn out Brexit process could be nearing its end as Johnson chased a withdrawal agreement with the EU.

Elsewhere Prudential jumped 6% to top the FTSE 100 leaderboard as the M&G business demerger became effective. M&G fell slightly on its first day of trading.

Smith+Nephew suffered its biggest loss in over a decade after it said Chief Executive Officer Namal Nawana would step down after just 17 months in the role.

Europe

European shares broke a three-day run of losses on Monday, as investors stuck to hopes that Britain will avoid a disorderly exit from the European Union, while positive corporate updates and comments on US-China trade talks added to the upbeat mood.

The pan-European STOXX 600 index ended the session 0.6% higher, barely budging on news House of Commons speaker John Bercow refused to allow a vote on Prime Minister Boris Johnson’s Brexit divorce deal, saying the same issue had been discussed on Saturday.

London’s blue-chip FTSE 100 was up 0.2%, lagging the broader markets due to a strong pound, while the FTSE midcap index of domestically focused stocks closed up 0.4%.

Germany’s GDAXI jumped 0.9%, leading gains among major regional indexes.

Business software group SAP’s shares gained 2.5% after saying it had reached a three-year deal with Microsoft to help its enterprise customers move their business processes into the cloud. The company also reiterated its forecast for the year and through to 2023.

German payments company Wirecard jumped 6% on news the firm was hiring KPMG to conduct an independent audit to address allegations in the Financial Times that its finance team had sought to inflate its reported sales and profits.

Most sub-sectors were in the black, led by miners and banks, but defensive sectors including healthcare and real estate lagged the broader market.

Aiding sentiment, a White House official said that US tariffs scheduled for December on Chinese goods could be withdrawn if negotiations continue to go well.

Investors will be scanning third-quarter report cards from European firms to assess their health amid lingering Brexit and trade uncertainties. UK-listed RBS and Barclays are scheduled to report this week, kicking off bank earnings.

Asia

Asian shares were mixed Monday amid uncertainties about Britain’s exit from the European Union and the ongoing trade conflict between the US and China.

Japan’s benchmark Nikkei 225 gained nearly 0.3% in afternoon trading to 22,555.14. South Korea’s Kospi picked up 0.2% to 2,064.27, while Hong Kong’s Hang Seng added 0.2% to 26,783.22. The S&P/ASX 200 in Australia inched up less than 0.1% to 6,652.50, while the Shanghai Composite slipped 0.2% to 2,932.96.

Shares fell in Taiwan and were mixed in Southeast Asia.

British Prime Minister Boris Johnson is trying to win over rebellious lawmakers in time to meet the Oct 31 deadline for the UK’s exit from the 28-nation European Union.

Oil

Oil prices fell on Monday amid growing signs of harm from the US-China trade war that has slowed global economic growth and reduced demand for commodities such as oil.

Global benchmark Brent crude was down $1.01 at $58.41 a barrel by 1327 GMT. US West Texas Intermediate crude oil declined 95 cents to $52.83 a barrel.

The Organization of the Petroleum Exporting Countries, Russia and other oil producers, an alliance known as OPEC+, agreed in December to cut supply by 1.2 million barrels per day (bpd) from the start of this year.

Russia, the world’s second-largest oil producer, said on Sunday it did not meet its supply reduction commitment in September because of an increase in natural gas condensate output as the country prepared for winter.

European refinery production in September fell 4% from the previous month and 4.2% year-on-year, data from Euroilstock showed on Monday. Production hit 10.451 million barrels per day (bpd), with output declining across all refined products.

Currencies

Sterling traded around $1.30 on Monday, a 5-1/2-month high, unmoved by House of Commons Speaker John Bercow’s decision not to immediately allow a vote on the Brexit withdrawal deal as investors thought a no-deal exit from the EU would be averted.

Investors have been rushing to cover short positions as the risk of a no-deal Brexit ebbed, with the most likely outcome now expected to be a three-month extension to the Oct 31 deadline to leave the European Union.

The pound slipped briefly after Bercow’s ruling on Monday. He said the same issue had been discussed on Saturday when opponents turned Prime Minister Boris Johnson’s big Brexit day into a humiliation.

Holding on to the 6% gains chalked up since Oct 10, the pound was at $1.2984 after Bercow’s statement, having slipped off an earlier high of $1.3012. Against the euro, the pound strengthened 0.3% to 85.89 pence.

The pound opened 0.5% weaker on Monday but recouped losses as comments from Northern Ireland’s Democratic Unionist Party were interpreted as meaning it could support Johnson’s Brexit deal.

But while the DUP comments may have been a catalyst, analysts said the market was being driven by investors scrambling to buy the currency before it rallied further, especially those who were “short” the currency.