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Edinburgh - Global stocks climbed for the first time in four days amid earnings reports in Europe and America that topped estimates. The yen strengthened a second day ahead of central bank decisions from Japan and the US.
The Standard & Poor’s 500 Index climbed the most in a week and banks led European shares higher after a three-day slump. The yen rose and Treasuries slipped for a seventh day as a report showed orders for US durable goods rose less than forecast in March. Copper fell for a second day and crude oil traded at about $43.50 a barrel in New York. The pound strengthened against all of its major counterparts.
While earnings set the tone on equity markets, trading volumes were light as investors await policy decisions from the Federal Reserve and Bank of Japan.
The nine-week rally in global equities that erased the worst start to a year on record has faltered in the face of uncertainty over the path of US interest rates and persistent signs of sluggish growth in the global economy. Corporate results have done little to alter perceptions on the strength of the economy
“The S&P 500 is at what I consider to be a key resistance area in that 2 090 range, so it’s going to take some good news to push through that,” said Alan Gayle, a senior strategist at Atlanta-based RidgeWorth Investments, which has about $37bn in assets.
“The FOMC starts its deliberations now and so it would appear at this critical positioning in the market near resistance that traders may be just waiting on the sidelines until the FOMC is done before making any real bets.”
The Federal Reserve concludes its meeting Wednesday, with investors pricing in no chance of an interest-rate increase. The Bank of Japan’s outcome is a day later and most analysts predict Governor Haruhiko Kuroda will unveil a stimulus boost. In the US, Apple releases results Tuesday that may shed more light on the state of the technology sector.
Stocks
The Standard & Poor’s 500 Index jumped 0.4% at 16:00, the biggest gain in a week. The index has alternated gains and losses in the past four sessions after climbing within 1% of its all-time high.
NXP Semiconductors NV rose after it forecast second-quarter sales that may top analysts’ estimates. DuPont added 1% after raising its 2016 earnings outlook, while JetBlue Airways and T-Mobile gained after their earnings beat estimates.
Whirlpool lost 6.2% after quarterly results were short of forecasts. Sarepta Therapeutics plunged 45% after a regulatory panel failed to back the company’s experimental drug to treat a form of muscular dystrophy.
The Stoxx Europe 600 Index rose 0.3%. Standard Chartered jumped 12% in London after the bank reported a decline in loan impairments and capital increased more than some analysts estimated. BP, the first oil major to report quarterly earnings, rallied after posting a surprise profit as a stronger-than-expected refining and trading performance helped mitigate the lowest crude prices in more than a decade.
The MSCI Emerging Markets Index rebounded 0.4%, after losing 0.4%, as stocks in China, India and South Korea advanced. The Hang Seng China Enterprises Index of mainland shares in Hong Kong rose 0.3% after sliding 1.4%. The Shanghai Composite Index added 0.6%, rebounding from the lowest since March.
Currencies
The dollar fell for a second day, approaching the weakest level in 10 months, as economists and traders see almost zero chance the Fed will raise interest rates. The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, fell 0.5%, adding to its 4.6% decline this year.
The pound strengthened 0.4% to 77.47 pence per euro, after touching the strongest level since March 14. A measure of risks to sterling following the June 23 vote on EU membership has tumbled by the most since last year’s general election.
The ringgit slid 0.6%. 1Malaysia Development Bhd. said it didn’t pay $50m of interest on a $1.75bn bond amid a dispute with Abu Dhabi’s sovereign wealth fund on who should be making the payment.
The yen strengthened 0.2% to 110.88 per dollar, having touched a three-week low of 111.91 on Monday. Nikkei newspaper reported that Japan’s $1.3trn Government Pension Investment Fund will start hedging to protect its foreign assets against an appreciating yen, a move Bank of America Merrill Lynch strategist Shusuke Yamada said could boost the local currency.
Commodities
Oil traded near $43 a barrel amid signs that, while global markets remain oversupplied, the surplus is gradually diminishing. Futures gained 1.5% in New York after slipping 2.5% on Monday, the first decline in five days. US crude stockpiles probably expanded by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
Gold has gone from the best-performing commodity in the first quarter to a metal in wait-and-see mode. Bullion is almost unchanged in April after surging 16 percent in the first three months of the year, the most in three decades. Prices have swung between gains and losses for eight consecutive days, the longest run in a year.
Bonds
Treasuries were little changed with the 10-year yield at 1.90%, the highest in a month, the highest this month, underscoring speculation that the Fed will keep its outlook for gradual rate increases. While futures show there’s no chance of a move this week, traders have boosted the probability of a rate increase in 2016 to 64% from 49% last week.
The US is scheduled to sell $34bn of five-year debt Tuesday and plans to auction seven-year notes and two-year floating-rate securities on April 28.
Banks are trying to sell off debt backed by oil and gas reserves, often at a loss, the law firm Haynes and Boone LLP said in a note delivered to clients Monday. Hanging onto these assets is getting more expensive, as regulators pressure banks to set aside more money to cover potential losses on the loans.
