NEW YORK, March 6 ― Oil prices rallied yesterday and stocks across the globe also rose as investors saw tariff threats as a US negotiating tactic and not a done deal, while concern ebbed over an inconclusive Italian election.
Stocks rose after four days of declines, with the US benchmark S&P 500 higher and Europe closing near session highs as pressure grew on US President Donald Trump to back off from planned tariffs on steel and aluminum.
“We have at least a bit of a rethink regarding the prospects of trade war,” said Art Hogan, chief market strategist at B. Riley FBR in New York, of the midday swing to higher stock prices. He said the Trump administration “sees the stock market as a report card for success and markets have so far said this trade war is not a good idea.”
Trump's hard talk regarding steel and aluminum tariffs “sounds like we're shifting back to posturing to get a better NAFTA deal,” Hogan added.
Trump said yesterday that Canada and Mexico could avoid being caught in his planned hefty tariffs on steel and aluminum imports if they ceded ground to Washington in trilateral talks on a new North American trade deal.
The Dow Jones Industrial Average rose 336.7 points, or 1.37 per cent, to 24,874.76, the S&P 500 gained 29.69 points, or 1.10 per cent, to 2,720.94 and the Nasdaq Composite added 72.84 points, or 1 per cent, to 7,330.71.
The pan-European FTSEurofirst 300 index rose 1.04 per cent and MSCI's gauge of stocks across the globe gained 0.64 per cent.
Emerging market stocks lost 0.34 per cent, weighed lower overnight by Asia. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.99 per cent lower. Japan's Nikkei lost 0.66 per cent, but US-traded Nikkei futures rose more than 1 per cent.
The euro, which earlier fell as much as 0.4 per cent versus the US dollar, edged higher against most major peers, including the greenback.
The common currency was whiplashed by weekend elections, as Germany's Social Democrats voted to re-enter a grand coalition with Chancellor Angela Merkel's conservatives, while results from Italy pointed to a messier outcome than expected ― a strong showing for anti-establishment parties and no group able to form a stable government.
Taken together, the election outcomes did not alter investors' view on the strength of the euro zone economy, although the Italian results put political risks in the region back on the radar.
“All in all, they are neutral to slightly positive for the euro,” said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities in New York.
The dollar index rose 0.09 per cent, with the euro up 0.14 per cent to US$1.2334 (RM4.813).
The Japanese yen weakened 0.40 per cent versus the greenback at 106.16 per dollar, while Sterling was last trading at US$1.3843, up 0.30 per cent on the day.
The Mexican peso gained 0.02 per cent versus the US dollar at 18.79 and the Canadian dollar was down 0.85 per cent against the greenback at 1.30 per dollar.
Crude prices rose on forecasts for robust oil demand growth and concerns Opec will not be able to increase its production capacity.
US crude rose 2.19 per cent to US$62.59 per barrel and Brent was last at US$65.54, up 1.82 per cent on the day.
Treasury yields turned higher as stocks surged pointing to more risk tolerance in markets.
“The bottom line is trade wars are not good A trade war on steel and aluminum is going to help a small number of people and it’s going to hurt a lot more and drive up prices,” said Mary Ann Hurley, vice president, fixed income trading at DA Davidson in Seattle.
Prices were also pressured by this week's heavy supply led by an expected CVS deal for more than US$40 billion to finance its purchase of Aetna.
“There are thoughts there is going to be rate-lock selling. The supply on the corporate end is a factor that’s really hurting Treasuries,” Hurley said.
Benchmark 10-year notes last fell 6/32 in price to yield 2.8789 per cent, from 2.857 per cent late on Friday.
The 30-year bond last fell 12/32 in price to yield 3.1514 per cent, from 3.132 per cent late on Friday.
Spot gold dropped 0.1 per cent to US$1,320.37 an ounce. US gold futures fell 0.17 per cent to US$1,321.20 an ounce.
Copper rose 0.39 per cent to US$6,925.00 a tonne. ― Reuters