Equity markets around the world neared a six-month high on Tuesday, buoyed by a rebound in Chinese stocks and an earnings-driven surge on Wall Street, while oil prices rose on concerns U.S. sanctions against Iran could cause supply shortages.
The equity gains prompted investors to sell safe-haven assets ahead of the first leg of this week’s $78-billion quarterly U.S. government refunding, pushing Treasury yields higher.
The U.S. dollar weakened against the euro on a more stable Chinese yuan after the currency pair neared but failed to break through technical levels supporting the single currency.
U.S. corporate revenues are growing at a time the European and Japanese central banks continue to prop up their economies, which is suppressing shorter-term interest rates, said Michael Kelly, global head of multi-asset at PineBridge Investments.
“Profits are incredible, actually, and it’s not just tax-cut sugar highs,” Kelly said.
Of the 428 companies in the S&P 500 that have released second-quarter earnings so far, 79 percent reported above analyst expectations, a beat rate that if it holds will be the highest since Thomson Reuters started reporting the figure in 1994.
MSCI’s all-country world index of stock markets in 47 countries gained 0.51 per cent, while the pan-European FTSEurofirst 300 index of leading regional shares rose 0.54 per cent.
In Toronto, the S&P/TSX composite index fell 133.94 points, or 0.82 per cent, to 16,286.30 in a broad-based retreat.
Gold producers led materials stocks down 1.8 per cent. Alamos Gold Inc. fell 5 per cent, while Kinross Gold Corp. and Barrick Gold Corp. dropped 2.3 per cent.
Gold was little changed at $1,218.30 an ounce. Silver edged up 0.2 per cent to $15.37 an ounce. Copper rose 0.8 per cent to $2.75 a pound.
After rising in early trading, energy stocks fell 1 per cent. Tourmaline Oil Corp. dropped 4.3 per cent, while Canadian Natural Resources Ltd. and Crescent Point Energy Corp. were down 1.6 per cent.
On Wall Street, the S&P 500 inched nearer to a record high on Tuesday, lifted by Amazon, Alphabet and Microsoft, and by a strong second-quarter earnings season that fueled optimism about the strength in the U.S. economy.
Based on the latest available data, the Dow Jones Industrial Average rose 126.73 points, or 0.5 per cent, to 25,628.91, the S&P 500 gained 8.05 points, or 0.28 per cent, to 2,858.45 and the Nasdaq Composite added 23.99 points, or 0.31 per cent, to 7,883.66
Powered by gains in technology stocks and strong second-quarter U.S. earnings, the benchmark S&P 500 was about half a percentage point from its record peak in January.
Tesla Inc. shares jumped more than 7 per cent after Chief Executive Elon Musk said on Twitter he is considering taking the electric car maker private at $420 per share.
The shares traded as high as $371.15 before easing a bit.
Such a deal, at about $72-billion, would take Tesla out of the glare of Wall Street but might limit its access to capital.
Chinese stocks rebounded overnight on hopes of fresh government spending, following a four-day selloff that had knocked them down about 6 percent.
China’s central bank on Friday raised the cost of shorting the yuan, which stabilized the currency and helped boost the euro against the dollar.
The dollar index fell 0.14 per cent, with the euro up 0.32 per cent to $1.159. The Japanese yen weakened 0.01 percent versus the greenback at 111.44 per dollar.
Turkey’s lira recovered as much as 2 per cent from Monday’s losses of more than 5 per cent after Washington moved to end duty-free access to U.S. markets for some Turkish exports.
Benchmark 10-year notes fell 10/32 in price to yield 2.973 per cent, up from 2.938 per cent late on Monday.
Crude prices climbed as the United States revived sanctions against Iran. U.S. crude rose 16 cents to settle at $69.17 a barrel and Brent gained 90 cents to settle at $74.65.
The first round of U.S. sanctions target Iran’s dollar purchases, metals trading, coal, industrial software and its auto sector.
Reuters and The Associated Press