By Herbert Lash
NEWYORK (Reuters) – The U.S. dollar and crude prices rose on Tuesday, spurred by continuing optimism a U.S.-China trade deal may be near, while a rally in global equity markets edged higher after China pressed U.S. President Donald Trump to remove recently imposed tariffs.
MSCI’s gauge of global stock markets set a fresh 21-month high and the Nasdaq and Dow Jones industrial average hit new intraday record peaks.
U.S. and European government bond yields climbed, lifted by trade optimism and more upbeat economic data. China’s push to remove more U.S. tariffs imposed in September as part of a “phase one” trade deal boosted optimism a trade deal was near.
“You’re seeing a continuation of optimism around a potential trade agreement to come with China as referenced by the potential removal of tariffs in December,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “It’s just another leg towards a potential agreement.”
Solid corporate earnings and upbeat data also provided equities a lift. More than three-quarters of the S&P 500 companies that have reported results so far have beaten profit expectations, Refinitiv data showed.
ISM’s services data showed a reading of 54.7 in October from 52.6 the prior month, or above expectations of 53.4, according to economists polled by Reuters. The data was the latest to ease lingering concerns about a slowdown in the U.S. economy.
MSCI’s gauge of stock indexes in 47 countries <.MIWD00000PUS> edged higher by 0.05%. The pan-European STOXX 600 index of small, mid-sized and large stocks <.STOXX> and the FTSEurofirst 300 index <.FTEU3> of leading regional shares both rose 0.2%.
On Wall Street, the Dow Jones Industrial Average <.DJI> rose 71.96 points, or 0.26%, to 27,534.07. The S&P 500 <.SPX> lost 0.31 points, or 0.01%, to 3,077.96 and the Nasdaq Composite <.IXIC> added 11.22 points, or 0.13%, to 8,444.42.
In Asia, optimism was helped by the People’s Bank of China’s cut in its medium-term lending rate, the first since early 2016. It was only a token 5 basis points to 3.25%, but it underscored Beijing’s ongoing desire to support the economy.
Oil prices rose more than 1% on hopes of a trade deal while gold fell more than 1%, en route to its biggest one-day dip in more than a month. [O/R]
For a graphic on U.S. non-manufacturers ISM index:
Also driving crude higher were remarks by OPEC Secretary-General Mohammad Barkindo, who said the oil market outlook for 2020 may be brighter than previously forecast, appearing to downplay any need for deeper production cuts.
Brent crude <LCOc1> futures for January delivery settled 83 cents higher at $62.96 a barrel, while U.S. West Texas Intermediate (WTI) crude <CLc1> futures rose 69 cents to settle at $57.23 a barrel.
The safe-haven yen and Swiss franc slid, as did gold.
The dollar index <.DXY> rose 0.48%, with the euro <EUR=> down 0.55% to $1.1065. The Japanese yen <JPY=> weakened 0.59% versus the greenback at 109.23 per dollar.
U.S. gold futures <GCcv1> settled down 1.8% at $1,483.70.
Benchmark 10-year U.S. Treasury notes <US10YT=RR> fell 21/32 in price to yield 1.8619%. The S&P financial sector <.SPSY> was the biggest gainer of the 11 sectors.
A steady rise in bond yields has been a big tailwind for financial stocks and has been one of the biggest contributors to the continued strength in equities, James said.
“Outside some significant macroeconomic downside shock, the market continues to reluctantly trade higher,” he said.
The 10-year U.S. Treasury barely yielded 1.5% in early October.
Germany’s 10-year bond yield rose as high as -0.308% <DE10YT=RR>, while the French 10-year hit -0.006% <FR10YT=RR> to within striking distance of positive territory.
For a graphic on World stocks surge $10 in 2019:
(Reporting by Herbert Lash; Editing by Bernadette Baum and Sonya Hepinstall)