NEW YORK, Jan 14 — Bond yields edged higher while a gauge of global equity markets hit a record high yesterday, lifted by optimism over the planned signing this week of a US-China trade deal and hopes the start of the US corporate earnings season will not disappoint.
Gold prices fell almost 1 per cent ahead of the signing at the White House tomorrow of the Phase 1 trade deal and as a de-escalation in US-Iran tensions in the Middle East reduced bullion’s safe-haven appeal.
US and euro zone government bond yields rose as the trade deal marks a major step in ending a dispute that has cut global growth and boosted demand for such safe-haven assets as bonds, gold and currencies like the Japanese yen and Swiss franc.
MSCI’s gauge of stocks across the globe gained 0.51 per cent, topping a record set on Friday, while emerging market stocks rose 0.96 per cent. The benchmark S&P 500 and tech-heavy Nasdaq composite indexes also hit all-time and closing highs on Wall Street.
The United States is planning to lift its designation of China as a currency manipulator, Bloomberg reported, citing people familiar with the matter, a move that added to the positive mood among investors.
Middle East tensions rose after the United States killed a top Iranian general on January 2 in Baghdad, knocking global stocks off a rally spurred in late 2019 on hopes a trade deal would be signed. Markets have rebounded as both Tehran and Washington desisted from further escalation after Iran retaliated for the killing with a missile attack on US troops in Iraq.
Investors are waiting for corporate results that start in earnest this week with large US banks, including Citigroup Inc , JPMorgan Chase & Co and Wells Fargo & Co, due to report today. Excluding energy, fourth-quarter earnings growth estimates are 1.9 per cent, according to Refinitiv.
“It’s put up or shut up time,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “We’ve priced in a big rally, we expect growth and now it’s time to see it. If we have a good earnings season, then it will be great.”
Saluzzi said, however, that he would not be surprised if US equities enter a “bit of a correction” despite a strong economic outlook, as they trade at almost 19 times expected earnings in 2020.
“Everything’s humming along,” he added. “With that said, it doesn’t take much to bang down on a market that is fully valued and had quite a run. Let’s not kid ourselves.”
The Dow Jones Industrial Average rose 83.28 points, or 0.29 per cent, to 28,907.05. The S&P 500 gained 22.78 points, or 0.70 per cent, to 3,288.13 and the Nasdaq Composite added 95.07 points, or 1.04 per cent, to 9,273.93.
Facebook Inc, Microsoft and Apple Inc provided the biggest lift both to the S&P 500 and Nasdaq composite.
The pan-European STOXX 600 index lost 0.18 per cent.
Renault SA fell to a six-year low after a media report said Japan’s Nissan Motor Co Ltd had accelerated secret contingency planning for a potential split from the French carmaker.
Other European automobile stocks also fell after China’s top auto body reiterated predictions that sales were likely to shrink for the third consecutive year in 2020.
US government bond prices fell, with the price of the 10-year Treasury note down 4/32 to push its yield up to 1.8406 per cent.
Yields on 10-year German bunds rose to -0.19 per cent, while yields on the German two-year government bond hit a nine-month high ahead of the signing of the US-China trade deal.
In currency markets, the offshore Chinese yuan hit a 5-1/2-month high and the yen dropped to a 7-1/2-month low as sentiment rose on the trade outlook.
The dollar index rose 0.03 per cent, with the euro up 0.13 per cent to US$1.1134 (RM4.52). The yen weakened 0.44 per cent versus the greenback at 109.94 per dollar.
Oil prices fell about 1 per cent as Middle East tensions eased and investors turned their focus to lackluster seasonal demand following a bearish US report last week of a large increase in gasoline stocks.
Brent crude settled down 78 cents at US$64.20 a barrel, while West Texas Intermediate crude slid 96 cents to settle at US$58.08 a barrel.
Gold, considered a safe haven during political and economic turmoil, rose last week to an almost seven-year peak of US$1,610.90 an ounce after a US drone strike killed a top Iranian commander in Baghdad and Iran launched missiles against US troops in Iraq in retaliation.
US gold futures settled down 0.6 per cent at US$1,550.60 an ounce. — Reuters
