Risk appetite revives on trade, shutdown optimism

Contracts on the Dow, Nasdaq, and S&P 500 all pointed to a firmer open and carmakers led the advance in the Stoxx Europe 600 Index.

Feb 12, 2019 01:02 IST India Infoline News Service

US stock futures rose and equities advanced across Europe and Asia on optimism over global trade and a tentative deal among American lawmakers to avert a government shutdown. Treasuries fell and the dollar edged lower.

Contracts on the Dow, Nasdaq, and S&P 500 all pointed to a firmer open and carmakers led the advance in the Stoxx Europe 600 Index.

The dollar held on to most of its recent gains after US lawmakers said they reached an “agreement in principle” on border security funding that would avert a second government shutdown.

President Donald Trump wants to meet his Chinese counterpart “very soon,” a White House adviser said in a TV address.

The prospect of a deal to keep the US government open together with hints that President Donald Trump may reach an accord with China appears to be rekindling the rally in riskier assets after a turbo-charged start to the year showed signs of ebbing last week. A dovish shift by the world’s central banks has also helped, but at the same time has underscored the dilemma facing investors -- join the chase for late-cycle gains, or gird themselves for a looming slowdown in growth.

“The trade talks are key,” Jason Vaillancourt, Putnam Investments global asset allocation co-head, said on Bloomberg TV. “If we can get a little bit of those growth engines starting to level out around the world, whether it be Japan or Europe, and just bottom out, then I think that will go a long way to putting a base under risky assets.”

Elsewhere, Japan’s 10-year bond yields remained in negative territory even after the central bank cut purchases of some longer-dated bonds for the first time since July in regular operation. The institution has sought to taper its purchases while focusing on yield targets rather than quantitative easing. Nissan reported worse-than-expected results.

Brent crude rose from its lowest close in more than a week. Emerging markets shares climbed and their currencies edged higher. The pound advanced as UK Prime Minister Theresa May updated lawmakers on the progress of Brexit talks with the EU. The offshore yuan strengthened for the first time in five days. Iron ore fell in Singapore.

These are the main moves in markets:

Stocks
  • Futures on the S&P 500 Index climbed 0.7% as of 8:28 AM New York time, the largest increase in more than a week.
  • The Stoxx Europe 600 Index increased 0.4%.
  • The MSCI All-Country World Index advanced 0.3%, the largest gain in a week.
  • The MSCI Emerging Market Index climbed 0.6%, the first advance in a week and the biggest increase in more than a week.

Currencies
  • The Bloomberg Dollar Spot Index dipped 0.1%, the first retreat in almost two weeks.
  • The euro climbed 0.2% to $1.1294, the first advance in more than a week and the biggest increase in almost two weeks.
  • The Japanese yen decreased less than 0.05% to 110.40 per dollar, the weakest in almost seven weeks.
  • The British pound jumped 0.2% to $1.2878, the biggest increase in almost two weeks.
  • The MSCI Emerging Markets Currency Index climbed 0.2%, the largest increase in more than a week.

Bonds
  • The yield on 10-year Treasuries advanced three basis points to 2.68%, the biggest rise in more than a week.
  • Germany’s 10-year yield increased two basis points to 0.14%.
  • Britain’s 10-year yield climbed one basis point to 1.186%.
  • The spread of Italy’s 10-year bonds over Germany’s fell six basis points to 2.718 percentage points.

Commodities
  • The Bloomberg Commodity Index jumped 0.7%, the biggest increase in two weeks.
  • Brent crude increased 2.2% to $62.87 a barrel, the highest in almost 12 weeks on the largest climb in more than a week.
  • LME copper dipped 0.5% to $6,118.50 per metric ton, the lowest in two weeks.
  • Gold jumped 0.4% to $1,312.85 an ounce, the largest climb in almost two weeks.

Here are some key events coming up:
  • Chinese Vice Premier Liu He was expected to join US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in high-level trade talks Thursday and Friday.
  • Earnings season continues with reports from companies including Cisco, Vivendi, Nvidia, Nestle, Coca-Cola, and Credit Suisse.
  • Sweden’s Riksbank is expected to keep interest rates at minus 0.25% on Wednesday after the first increase in more than seven years in December.
  • Data Wednesday is expected to show US consumer prices rose 0.1% in January, after falling 0.1% in December.
  • If no deal is reached on the US-Mexico border wall, parts of the federal US government may shut down again later this week when stopgap government funding expires.

Source: Bloomberg

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