US stocks rise on higher oil prices and as the dollar gains

U.S. stocks rise on earnings optimism; dollar gains
July 9, 2018
At midday: TSX reaches new intraday high as energy stocks jump
July 10, 2018

US stocks rise on higher oil prices and as the dollar gains

New York — The S&P 500 stock index hit a four-month high on Tuesday, boosted by higher oil prices and strong earnings, while the dollar rose against the safe-haven yen as investors bought riskier assets.

World share markets remained near three-week highs, supported by optimism about US company earnings and the notion that global economic growth can withstand trade tensions.

“The first major earnings report came out, and PepsiCo’s earnings beat expectations and that’s a good start for the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Energy shares were also lifted by oil prices, which rose due to growing supply outages as Norway shut one oil field amid a worker strike and Libya said production fell by more than half in recent months.

Brent crude — up almost 20% this year — was last at $78.71, up 0.82% on the day. US crude rose 0.22% to $74.01 a barrel.

The Dow Jones Industrial Average rose 128.19 points, or 0.52%, to 24,904.78; the S&P 500 gained 7.66 points, or 0.28%, to 2,791.83; and the Nasdaq Composite added 11.46 points, or 0.15%, to 7,767.66.

Second-quarter US corporate results start in earnest this week and are expected to showcase earnings growth of more than 20% across all sectors, thanks to recent tax cuts, high oil prices and robust economic growth.

The pan-European FTSEurofirst 300 index rose 0.41% and MSCI’s gauge of stocks across the globe gained 0.15%. Investors have not forgotten about the underlying potential for an escalated trade war after China and the US slapped tit-for-tat tariffs on $34bn worth of each other’s goods. Even so, no fresh salvos have since been fired.

Most analysis suggests trade measures are not going to have a big impact on global growth, said Thierry Wizman, global interest rates and currencies strategist at Macquarie Group. “Even if the trade concerns were still there, [investors] would be confronting a better earnings outlook in 2018, so that’s another consideration that’s keeping risk appetite strong.”

German export figures and Chinese factory gate prices this week have also offered reassurance on economic momentum. The risk-on sentiment nudged the dollar towards a six-month high against the yen, with the greenback poised for a further boost if consumer price inflation figures come in higher than expected on Thursday.

The dollar index rose 0.15%, with the euro down 0.18% to $1.1728.

In Britain, sterling has been pressured by fears that cabinet resignations could lead to rebellion in the ruling party’s ranks, toppling Prime Minister Theresa May or triggering fresh elections. While this looks unlikely, the uncertainty caused sterling to sink as low as $1.3225 before recovering. However, a Bank of England rate hike may also support the pound, with markets assigning a roughly 60% chance of a 25 basis-point rate hike in August.

Politics dominated Turkey, where President Recep Tayyip Erdogan’s new cabinet lacked market-friendly names and included, instead, his son-in-law as finance minister. Turkish five-year credit default swaps, used to insure against default or restructuring, rose more than 20 basis points, while the lira gave up initial gains that had helped reverse some of Monday’s 3% fall.