Tuesday 18:30 GMT
What you need to know
- US and European stocks edge higher
- Focus remains on tax cut proposals and Fed chairmanship
- Dollar mixed as Treasury yields hold stead
- Brent oil stays above $60 a barrel mark
Overview
US and European stocks moved higher as a string of mostly encouraging earnings reports and economic releases on both sides of the Atlantic offered a diversion from recent developments in Washington and Catalonia.
The dollar put in a mixed performance as Monday’s strong rally for US Treasuries cooled, while sterling maintained its upward momentum ahead of Thursday’s Bank of England rate decision.
Brent oil spent a third day above the $60-a-barrel level, supported by hopes that Opec-led supply curbs would be extended.
Hot topic 1
In New York, the S&P 500 equity index was up 0.2 per cent at 2,576 in early afternoon trade while the Nasdaq Composite was 0.4 per cent higher after earlier hitting an intraday record peak of 6,729.52.
Shares in Mondelez and Kellogg were both up nearly 6 per cent, helping the S&P’s consumer non-cyclical sector gain 0.8 per cent.
Wall Street’s moderately positive tone came against a backdrop of continued uncertainty regarding tax reform and the identity of the next Federal Reserve chair.
“The tax overhaul is getting overshadowed by other White House news, namely the probe into Trump’s alleged ties with Russia,” said Bas van Geffen, quantitative analyst at Rabobank.
“Any focus on ‘Russiagate’ may distract President Trump’s administration and may cost the president significant political capital, which may further frustrate negotiations on the tax overhaul.
“All this uncertainty around the tax bill also keeps US Treasury yields on the back foot.”
In Europe, the pan-European Stoxx 600 index rose 0.3 per cent with BP up 1.7 per cent after it announced robust profits and a share buyback.
In Madrid, the Ibex 35 rose another 0.7 per cent for a two-day gain of 3.2 per cent as market concerns about Catalonia returned to the backburner.
Hot topic 2
There were plenty of economic reports for participants to digest.
Preliminary data showed that eurozone gross domestic product rose 0.6 per cent in the third quarter from the previous three months, down from 0.7 per cent in the second quarter but ahead of analysts’ estimates.
The unemployment rate in the region fell to 8.9 per cent in September — its first dip below 9 per cent since the start of 2009.
Eurozone consumer price inflation, however, rose 1.4 per cent in the 12 months to October — missing expectations.
“October’s CPI data will have reinforced the European Central Bank’s judgment that its inflation goal is not yet in sight,” said Jennifer McKeown at Capital Economics.
“With the economic recovery continuing apace, the ECB will still be keen to reduce its policy support. But it will continue to do so very slowly.”
The 10-year German Bund was little moved by the day’s data, with yield holding steady at 0.36 per cent. The 10-year US Treasury yield was also flat at 2.37 per cent, after a 6 basis-point slide on Monday took it back below a key resistance level at 2.40 per cent.
The day’s US economic reports showed the Conference Board’s index of consumer confidence leaping to a 17-year high last month, while the Chicago purchasing managers’ index climbed to a six-year peak.
The employment cost index, meanwhile, rose 0.7 per cent in the third quarter. “The firming in compensation is good news for the Federal Reserve,” said Action Economics.
“Though it won’t affect Wednesday’s policy decision, the data support expectations for a December hike.”
Indeed, the US central bank’s policy statement is likely to be overshadowed by an expected announcement on Thursday of President Trump’s nomination for the new Fed chair.
Forex
The barrage of transatlantic data releases left the euro trading little changed against the dollar at $1.1655, although the US currency managed a 0.5 per cent rise against the yen to ¥113.71.
But sterling was up 0.5 per cent versus the dollar at $1.3275 and the euro was 0.5 per cent lower at £0.8777, amid continued expectations that the Bank of England would raise interest rates tomorrow.
Analysts also highlighted hopes for an acceleration of Brexit negotiations.
Commodities
Brent oil was up a further 0.5 per cent at $61.18 a barrel, its highest for more than two years. The advance marked a sixth successive day of gains for Brent.
West Texas Intermediate — the main US crude contract — was 0.3 per cent firmer at $54.32.
Gold held within its recent range as it fell $6 to $1,268 an ounce.
Additional reporting by Michael Hunter in London and Hudson Lockett in Hong Kong
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