Stocks Rise With Commodities as Dow Tops 19,000; Oil Fluctuates

2016-11-22 09:54:19

By Rita Nazareth and Lukanyo Mnyanda, Bloomberg News

Stocks headed toward their highest level in almost a month as a rally in metals lifted commodity producers from BHP Billiton Ltd. to Glencore Plc. Bonds rose. Oil fluctuated.

The MSCI All Country World Index extended this month’s advance, the Dow Jones Industrial Average topped 19,000 for the first time and emerging-market shares surged. Gold headed for its first back-to-back increase since Donald Trump’s election win while copper paced gains in metals. Oil traded near $48 a barrel as OPEC members sought to reach a deal on output cuts. European bonds rallied on bets policy makers will extend their stimulus program.

Equities advanced on speculation that the world’s largest economy is strong enough to withstand higher borrowing costs. The market-implied odds of a Federal Reserve hike in December reached 100 percent for the first time yesterday, according to Bloomberg calculations based on futures. A rate increase “could well become appropriate relatively soon,” Fed Chair Janet Yellen said last week. The fresh stock highs also came as American companies ended a five-quarter profit slump.

“We’ve finally broken through to new records,” said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn, Germany. “We can move on to pricing in the improving outlook: there are strong signs that the U.S. economy is in good shape and that bodes well for corporate earnings.”

Data at 10 a.m. in Washington will probably show sales of previously owned U.S. homes eased in October while remaining close to a nine-year high, according to economists’ forecasts compiled by Bloomberg. Reports on new home sales, durable goods and manufacturing are due Wednesday, as well as minutes from this month’s Fed meeting. U.S. markets will be closed on Thursday for the Thanksgiving holiday.

Stocks

MSCI’s global gauge rose 0.3 percent at 9:30 a.m. in New York, on course for the biggest monthly advance since July. Commodity producers and banks led gains in the benchmark.

The S&P 500 Index added 0.2 percent to 2,203.09. The new milestone for the S&P 500 pushed the index to an annual gain of 7.6 percent, a recovery for a gauge that started the year down as much as 11 percent.

The Stoxx Europe 600 Index added 0.4 percent in London, following gains in U.S. equities. Anglo American Plc and BHP Billiton Ltd. rose at least 4.4 percent, helping a gauge of commodity producers extend its highest level since June 2015. Enel SpA led an advance in utilities after announcing a plan to cut costs and dispose assets of about 3 billion euros ($3.2 billion).

The MSCI Emerging Markets Index extended a two-day rally to 1.8 percent.

Commodities

Oil slipped 0.3 percent in New York, erasing an earlier gain. The details of a supply accord will be finalized Tuesday and “everybody is on board,” Nigerian OPEC delegate Ibrahim Waya said in Vienna, where the group is meeting to discuss output quotas ahead of a summit next week. Libyan OPEC Governor Mohamed Oun said Monday that talks had gone well.

“An OPEC deal is not priced into the market yet, even if the confidence in a deal seems quite high,” said Bjarne Schieldrop, chief commodities analyst at SEB AB bank in Oslo. “I would be very surprised if we don’t see a cut next week and price moving to $55 a barrel.”

Gold extended a rebound from the lowest in more than five months as a Bloomberg gauge of the dollar lost steam. Copper headed for the highest close since July 2015 while iron ore and steel in China surged to their daily limits.

Currencies

The dollar retreated from a near-six-month high against the yen as traders looked beyond the Federal Reserve’s December policy meeting in search of fresh impetus.

A gauge of the U.S. currency was little changed Tuesday after climbing to levels last seen in January a day earlier. The dollar has tracked Treasury yields higher as futures traders fully priced in an interest-rate hike for the Federal Reserve’s Dec. 14 policy decision partly on speculation that President-elect Donald Trump’s economic policies will fuel inflation.

The dollar may run out of steam and the weakness seen earlier this year will likely resume, according to Vasileios Gkionakis, London-based head of global foreign-exchange strategy at UniCredit SpA.

“The dollar is, probably on a trade-weighted basis, about 10 percent overvalued,” Gkionakis said in an interview on Bloomberg TV with Anna Edwards and Yousef Gamal El-Din. While the Fed is going to increase interest rates in December, the move higher in the dollar has “brought it way above of what real-rate differentials would suggest.”

Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed as of 8:21 a.m. in New York. The greenback was at 110.97 yen. The yen appreciated earlier on demand for relatively safe assets after a magnitude 7.4 earthquake struck Japan.

Bonds

Bonds climbed across Europe, finding relief after weeks of being whipsawed by political headlines and speculation about higher U.S. interest rates. With the next ECB policy decision due in December, investors are looking for clues in a series of recent remarks from officials who pledged to maintain current levels of monetary stimulus.

The two-year Treasury note yield climbed two basis points to 1.10 percent, according to Bloomberg Bond Trader Data. That’s the highest since 2010. The benchmark 10-year yield dropped two basis points to 2.30 percent, after reaching 2.36 percent on Friday, the highest since November 2015.

“After the Trump Shock, it’s easy for the Fed to hike, because inflation expectations have gone up and the New York Dow has gone up,” said Hideaki Kuriki, a debt investor in Tokyo at Sumitomo Mitsui Trust Asset Management. He said he is “100 percent” certain of tightening next month.

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