Monday 16 September 2019

US markets rally as Europe takes a bath

Markets Report

US stocks extended gains while European equities pared losses as investors awaited new developments in the Sino-American trade war. (stock picture)
US stocks extended gains while European equities pared losses as investors awaited new developments in the Sino-American trade war. (stock picture)

US stocks extended gains while European equities pared losses as investors awaited new developments in the Sino-American trade war.

The S&P 500 Index climbed yesterday as a rally in Texas crude pushed energy shares higher. With the exception of technology, sectors across the benchmark registered increases. Healthcare stocks gained as insurers rallied.

Ten-year treasury yields crept upwards after hitting a three-year low, while the dollar held steady.

President Donald Trump's recent pronouncements on trade have left investors jumpy as they await his next move and as optimism for a resolution becomes more difficult to sustain.

With the latest round of tariffs from both sides due to be staggered from September 1, China appears to be bracing for the worst and the US leader's credibility is becoming a key impediment to a deal. In addition, traders have to contend with his attacks on the Federal Reserve, which have clouded the outlook for monetary policy.

"We're one headline or one tweet away from triumph or tragedy almost every single day right now," Arthur Hogan, chief market strategist at National Securities Corp, told Bloomberg TV.

"We're really on a knife edge. And that's what makes trading really difficult."

Technology companies and insurers led a decline on the Stoxx Europe 600 index. Benchmarks nudged higher in Sydney and Seoul, were little changed in Tokyo, and dropped in Shanghai and Hong Kong.

The euro slipped, the pound weakened and gilts climbed after British prime minister Boris Johnson said he would suspend parliament from mid-September to mid-October, increasing the risk of a no-deal Brexit.

It is normal for parliament to be suspended before a new prime minister sets out his legislative agenda, although the five-week break that Mr Johnson has set is the longest since World War Two.

European bonds advanced, with Italian benchmark yields hitting record lows as talks to form a coalition government progressed.

Crude oil extended gains after an industry report showed a bigger-than- expected drop in American crude inventories and as Iran all but ruled out a meeting with the US.

Bloomberg

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