Stocks Bounce Back as Risks Recede; Dollar Slides: Markets Wrap

(Bloomberg) --

Stocks advanced as a broad easing of risks across the globe gave investors a reprieve. The dollar fell the most since June, while Treasuries were mixed.

The S&P 500 rebounded from Tuesday’s losses along with European and Asian shares as political tensions appeared to subside in Hong Kong, Italy and the U.K., while indicators in China and Europe hinted global economic growth may not be as bad as some expected. Technology shares, which led yesterday’s decline that was the first in four sessions, paced the advance. The 10-year Treasury yield traded around 1.45%, while the dollar gained versus the yen.

Equities in Hong Kong rose the most since 2018 after embattled leader Carrie Lam said she formally withdrew legislation to allow extraditions to China, the detonator for three months of often-violent protests. In the U.K., the pound held gains after a law that would block a no-deal Brexit passed a key Vote in Parliament. The euro advanced after purchasing managers indexes for the region beat expectations, while the onshore Chinese yuan gained following another stronger-than-forecast currency fixing.

“The main news is geopolitical, with less risk in Hong Kong, and Italy and the U.K. Investors are reacting positively to the lower geopolitical risks even though there’s still concerns over trade tensions as well as slower economic growth,” said Kate Warne, an investment strategist at Edward Jones. “Overall, it’s a positive day. It’s about offsetting the worries of yesterday which really focused, I think, on geopolitical risks.”

Traders are rushing back into riskier assets as event risks seem to be receding, from a possible Chinese crackdown in Hong Kong to confrontations between the European Union and two of its biggest members. At the same time, investors remain on the alert for any news on China-U.S. trade talks. And remaining in the background is the upcoming Federal Reserve meeting, and the speculation surrounding how much the central bank may cut this year to stave off a potential economic slowdown.

Elsewhere, oil futures climbed above $56 a barrel. The Canadian dollar gained after the Bank of Canada left interest rates unchanged. In the U.S., with Florida orange groves seemingly escaping major damage from Hurricane Dorian, concern now turns to soy, corn and cotton fields as well as livestock in Georgia and the Carolinas as the storm churns northward.

Here are some key events coming up:

• Fed speakers this week include Fed chair Jerome Powell on Friday.
• The U.S. jobs report on Friday is projected to show the widely watched nonfarm payrolls rose by 160,000 in August, versus 164,000 the month prior. Estimates are for unemployment to be steady at 3.7% and the average hourly earnings rate of increase to slow to 3.0%.

These are the main moves in markets:

Stocks

• The S&P 500 Index rose 1.1% as of 4 p.m. New York time.
• The Nasdaq Composite Index gained 1.3%.
• The Stoxx Europe 600 Index advanced 0.9%
• The U.K.’s FTSE 100 Index climbed 0.6%.
• The MSCI Emerging Market Index jumped 1.8%

Currencies

• The Bloomberg Dollar Spot Index sank 0.6%, the biggest slide since June 20.
• The euro gained 0.5% to $1.1031.
• The British pound increased 1.2% to $1.2222.
• The Japanese yen weakened 0.4% to 106.36 per dollar.

Bonds

• The yield on 10-year Treasuries was steady at 1.45%.
• The yield on two-year Treasuries fell two basis points to 1.43%.
• Britain’s 10-year yield jumped eight basis points to 0.493%.
• Germany’s 10-year yield climbed three basis points to -0.67%.

Commodities

• West Texas Intermediate crude advanced 4.4% to $56.31 a barrel.
• Gold rose 0.5% to $1,564.10 an ounce.

--With assistance from Robert Brand.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Todd White

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