Stocks Rise as Trump Talks Asia Trade; Bonds Gain: Markets Wrap
(Bloomberg) -- U.S. stocks climbed and bonds advanced, while the dollar slipped as President Donald Trump tried to tackle trade on his Asia tour. A crackdown on corruption in Saudi Arabia sent oil soaring to its highest price in more than two years.
The Stoxx Europe 600 Index climbed after a European purchasing managers index indicated strong momentum at the start of the fourth quarter. The Nikkei 225 Stock Average reached its highest level in more than 21 years. Commodities rallied, and precious metals surged.
“We have stressed repeatedly that the biggest ‘risk’ to our conservative (oil) price forecast is a destabilization of the situation in Saudi Arabia,” commodity analysts at Commerzbank AG wrote in a note to clients Monday. “The probability at least of such a scenario increased at the weekend after eleven princes, four ministers and dozens of former ministers were arrested in Saudi Arabia. If we also consider the reports of another ballistic missile from Yemen that was intercepted near Riyadh, the crash of a helicopter in Saudi Arabia with a number of government representatives on board, and the completely unexpected resignation of Lebanon’s Saudi-backed prime minister, the tensions in the Middle East become virtually tangible.”
News out of Asia was a dominant theme for many assets, with investors digesting inflation comments from Bank of Japan Governor Haruhiko Kuroda, remarks on excessive leverage from his Chinese counterpart Zhou Xiaochuan and the grievances on the balance of trade from the U.S. president, who goes on to South Korea and China this week.
“I think there is a bit too much noise that comes from Trump’s trips abroad to get a decent signal for markets,” said Mark McCormick, North American head of foreign-exchange strategy at Toronto-Dominion Bank. “The good old macro story is still running behind the scenes, so I don’t see Trump headlines offering much impact on the markets this week.”
McCormick added that Wall Street’s more likely to react to geopolitics than trade chatter.
“I think you have to keep North Korea on the radar this week, especially if they try to poke the bear over the next two weeks,” he said. “I think many are concerned they might to provoke Trump on the visit, with a missile launch or nuclear test. That would have a much greater impact (though fleeting) than rhetoric on trade or economic policy.”
News on central bankers also will be closely watched. Federal Reserve Bank of New York President William Dudley plans to retire in the middle of next year. His early departure would mean changes at the Fed’s top three positions within a relatively short period. Trump announced last week that Fed Governor Jerome Powell will be nominated to replace Chair Janet Yellen when her term expires in February. Vice Chairman Stanley Fischer retired in mid-October.
But investors are hopeful that despite the moves there won’t be an acceleration of rate hikes on the horizon.
“The U.S. economy really bottomed out during the summer and has been on a clear upward trend since then,” said Jon Adams, a Chicago-based senior investment strategist with BMO Global Asset Management. “Investors are digesting payrolls figures from Friday as well as tax reform prospects right now. But payrolls in particular really solidified our view that we’re on solid economic footing and there’s really no reason for central banks to get too carried away as far as rate hikes right now.”
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Here are key events to watch out for this week:
- The European Commission’s chief Brexit negotiator Michel Barnier and U.K. Brexit Secretary David Davis resume talks.
- Earnings season continues with announcements from Toyota Motor Corp., BMW AG, Walt Disney Co., Adidas AG, and Siemens AG. European financial companies set to report include Intesa Sanpaolo SpA, Banca Monte dei Paschi di Siena SpA,Credit Agricole SA, Allianz SE and Zurich Insurance Group AG.
- Donald Trump continues on his first official trip to Asia as president, accompanied by Secretary of State Rex Tillerson and a group of U.S. business leaders.
- New Jersey and Virginia will choose new governors Tuesday in an off-year election
- U.S. consumer sentiment probably cooled in early November from a more than 13-year high; the University of Michigan’s report is out on Friday.
- OPEC releases its World Oil Outlook.
- Argentina, Australia, Mexico, New Zealand, Peru, Malaysia, Poland, Serbia and Thailand set monetary policy.
And these are the main moves in markets:
- The S&P 500 Index closed up 0.1 percent at 2,591.13, while the Nasdaq 100 Index added 0.3 percent.
- The Stoxx Europe 600 climbed 0.1 percent.
- The U.K.’s FTSE 100 Index gained less than 0.1 percent to the highest on record.
- Germany’s DAX Index fell less than 0.1 percent.
- Japan’s Nikkei 225 rose less than 0.1 percent to the highest since June 1996.
- The MSCI Emerging Market Index increased 0.7 percent.
- The Bloomberg Dollar Spot Index dropped 0.3 percent.
- The euro gained less than 0.05 percent to $1.161.
- The British pound climbed 0.7 percent to $1.3174.
- The Japanese yen rose 0.3 percent to 113.75 per dollar.
- The yield on 10-year Treasuries declined two basis point to 2.316 percent, the lowest in more than two weeks.
- Germany’s 10-year yield fell three basis points to 0.336 percent, the lowest in almost two months.
- Britain’s 10-year yield declined less than one basis point to 1.256 percent, the lowest in more than seven weeks.
- Japan’s 10-year yield decreased three basis points to 0.024 percent, the lowest since September.
- West Texas Intermediate crude gained 3.1 percent to $57.34 a barrel, the highest since June 2015.
- Gold increased 0.9 percent to $1,281.04 an ounce.
- Copper rose 1.4 percent to $3.16 a pound, the highest in more than a week.
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