NEW YORK, Aug 22 — A global equities gauge rose yesterday for a third day in four as bets on more economic stimulus overcame, for now, worries over the rising prospect of a global recession.
The brief inversion of the curve between 2-year and 10-year US Treasury yields loomed, however, as it is seen as a harbinger for an economic contraction. The curve has at some point inverted in four of the past six sessions.
Strong earnings in the United States and the report of talks on a megamerger in European autos triggered gains in stocks, and the improved risk sentiment drove safe-haven yields higher while the yen and gold edged lower.
There was muted reaction across markets to minutes from the Federal Reserve’s meeting late last month. Policymakers debated lowering interest rates more aggressively than the quarter-point cut last month, while showing broad concern over a global economic slowdown and trade tensions.
The trade war escalated further after that Fed meeting, and investors were cautious about the current validity of policymakers’ comments.
“It’s really old news. This is from the July meeting and what (Fed Chairman Jerome) Powell has to say on Friday is going to be much, much more important than these minutes,” said Mary Ann Hurley, vice president in fixed-income trading at D.A. Davidson in Seattle.
Traders expect that the Fed’s annual Jackson Hole, Wyoming, symposium and a Group of Seven summit this weekend will shed light on the next steps policymakers will take to support economic growth.
Auto shares led European stocks higher after Italian media suggested the merger talks between Fiat Chrysler and Renault have continued despite reports to the contrary.
In US equities, earnings from Target and Lowe’s boosted consumer-centreed stocks and overall market sentiment.
“As long as we have the healthy environment in jobs that we have right now, it’s going to be very difficult to shake people’s confidence,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. “At the end of the day, if people are employed, they’re going to go out and spend some money.”
The Dow Jones Industrial Average rose 240.29 points, or 0.93per cent, to 26,202.73, the S&P 500 gained 23.92 points, or 0.82per cent, to 2,924.43 and the Nasdaq Composite added 71.65 points, or 0.90per cent, to 8,020.21.
The pan-European STOXX 600 index rose 1.21per cent and MSCI’s gauge of stocks across the globe gained 0.70per cent.
Emerging market stocks rose 0.31per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.16per cent lower, while Japan’s Nikkei lost 0.28per cent.
Yields rise, yen falls
Futures markets have fully priced a 25-basis-point cut in next month’s Fed meeting. yesterday, US Treasury yields rose as rising stock prices reflected improving risk sentiment.
Benchmark 10-year notes last fell 9/32 in price to yield 1.5893per cent, from 1.559per cent late on Tuesday.
Germany sold 30-year bonds with a negative yield for the first time at an auction yesterday, a milestone for a fixed-income market where the entire curve now yields less than zero. The very weak demand seen at the auction was expected.
West Texas crude futures fell after US government data showed a drawdown in domestic crude stockpiles but rises in refined product inventories, while worries about a possible global recession capped gains in Brent.
US crude fell 0.32per cent to US$55.95 (RM233.59) per barrel and Brent was last at US$60.40, up 0.62per cent on the day.
In currencies, the dollar rose against the Swiss and Japanese safe-haven currencies and the dollar index rose 0.12per cent, with the euro down 0.14per cent at US$1.1083. Sterling was last trading at US$1.2123, down 0.37per cent on the day.
The Japanese yen weakened 0.37per cent versus the greenback to 106.63 per dollar.
Spot gold dropped 0.3per cent to US$1,502.15 an ounce. — Reuters
