Stocks Rally For a Fourth Day as ECB Sinks Bonds: Markets Wrap

(Bloomberg) -- Trade hopes and the end of easy money were the twin themes in trading on Wednesday, with U.S. stocks extending gains and bonds falling as this week’s risk-on mood endured.

The S&P 500 pushed higher for a fourth consecutive day after dipping earlier into negative territory, led by gains in financials and health care companies. The Dow Jones Industrial Average climbed the most in almost two months. The Nasdaq Composite Index reached another record high, pushing its return for the year beyond 11 percent. Equities had opened higher across Asia on signs that major economies will step back from the brink of a trade war.

The Stoxx Europe 600 Index finished little changed as a strengthening euro provided a headwind and as Italian shares fell. Both were reacting to signs that the ECB is ready to discuss an end to quantitative easing, which sank bonds in the region and spurred fears for Italy’s embattled lenders.

The dollar stayed lower after the U.S. trade deficit narrowed to the lowest level since September thanks to record exports. Most metals rallied and 10-year Treasury yields climbed above 2.95 percent after China was said to offer to buy more American products and on reports the Treasury Department favors less sweeping investment limits on the Asian nation.

Investors have been here before: The on-again, off-again threat of protectionism is becoming a common refrain in global markets. They’ll now look ahead to the G-7 meeting this week for further developments in the story, as well as to this month’s meetings of both the Federal Reserve and the European Central Bank for more clues on monetary policy. ECB chief economist Peter Praet on Wednesday confirmed next week’s gathering will be pivotal for a decision on when to end its bond-buying program.

Elsewhere, oil slid lower after a U.S. government report showed a surprise increase in domestic crude stockpiles. Brazil’s real deepened losses after closing at the weakest since 2016 on Tuesday following a failed attempt by the central bank to halt the currency’s slide.

Terminal users can read more in Bloomberg’s Markets Live blog.

These are some key events to watch this week:

• On Thursday, Japanese Prime Minister Shinzo Abe meets with U.S. President Trump at the White House to discuss the planned U.S. summit with North Korea’s Kim Jong Un.
• Also on Thursday, euro-zone GDP.
• A Turkish rate decision is due on Thursday.
• G-7 Leaders’ Summit starts in Quebec Friday through to June 9.

These are the main moves in markets:

Stocks

• The S&P 500 Index increased 0.9 percent to 2,772.35, the Dow Jones Industrial Average gained 1.4 percent 25,146.39 and the Nasdaq Composite Index rose 0.7 percent to a record 7,689.24 as of 4:05 p.m. in New York.
• The U.K.’s FTSE 100 Index gained 0.3 percent.
• The MSCI Emerging Market Index increased 0.5 percent, touching the highest level in three weeks.
• Japan’s Nikkei 225 Stock Average gained 0.4 percent.

Currencies

• The Bloomberg Dollar Spot Index slumped 0.2 percent.
  The euro rose 0.5 percent to $1.1773.
• The British pound gained 0.2 percent to $1.3414.
• The Japanese yen weakened 0.4 percent to 110.22 per dollar.

Bonds

• The yield on 10-year Treasuries rose four basis points to 2.97 percent.
• Italian 10-year yields jumped 15 basis points to 2.94 percent, bringing the two-day increase to 40 basis points.

Commodities

• West Texas Intermediate crude dropped 0.7 percent to $65.05 a barrel.
• Gold rose 0.1 percent to $1,297.02 an ounce.

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