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London - Markets struck a note of cautious optimism on Wednesday, with US and European equities rebounding and haven assets declining. The pound extended its gain following the surprise election announcement.
Banks led gains in the S&P 500 Index and lifted the Stoxx Europe 600 Index after its biggest loss since November. Treasuries slumped as the 10-year yield moved above 2.20%.
Sterling edged higher after hitting the strongest level since October. Oil fluctuated before key data and the dollar strengthened.
Investors seem to be taking the addition of yet another macro risk in stride as the UK vote joins a slew of elections to be held this year against a backdrop of rising populism in Europe. Geopolitical tensions continue to simmer over both North Korea and Syria, overshadowing signs that the pace of monetary tightening in the world’s biggest economy looks uncertain.
“We’re still hugely vulnerable to political risks,” said Christopher Jeffery, asset allocation strategist at Legal & General Investment Management in London.
“Polling for the first round of the French election is hugely tight. We have no clear indication of how the drama in North Korea will play out. And those factors are more important to us than the ebb and flow of earnings news in the short term.”
Here’s what investors are watching:
The Fed’s Beige Book release on Wednesday will be keenly eyed for clues as to what’s driven the recent cooling of US economic activity. The first round of voting in the French election is on Sunday and the two leading candidates will run off in a winner-takes-all contest on May 7.
US oil inventories fell 840 000 barrels last week, according to the API. More official EIA data due today may show a larger drop of 1.4 million barrels.
Stocks
The S&P 500 rose 0.4% to 2 351.37 at 14:31, headed for just the second advance in six sessions. Earnings remain in focus, with Morgan Stanley rising after earnings topped estimates on a jump in fixed-income revenue. IBM slumped in after its 20th consecutive quarterly sales decline. The Stoxx Europe 600 increased 0.3% after dropping 1.1% on Tuesday.
Currencies
The yen dropped 0.6% to ¥109.04/$ after gaining 0.5% on Tuesday. The Bloomberg Dollar Spot Index rose 0.2% following a two-day decline. The pound rose less than 0.1% to $1.2853 after its 2.2% surge on Tuesday. The euro was little changed at $1.0726.
Bonds
The yield on 10-year Treasuries rose four basis points to 2.21% after an eight-basis-point plunge on Tuesday. The yield on German notes due in a decade also increased five basis points to 0.20%.
Commodities
Gold declined 0.5% to $1 283.42 an ounce after closing at the highest since November in the previous session. West Texas Intermediate crude oil was little changed at $52.42 a barrel following two days of losses.
Asia
The Shanghai Composite Index fell 0.8%, taking its four-day loss to 3.2%. The main Shenzhen market was also down a fourth day.
The Hang Seng Index slid 0.4% and the Hang Seng China Enterprises Index dropped below the 10 000 level for the first time in two months. Japan’s Topix index was little changed, while Australia’s S&P/ASX 200 Index lost 0.6% and South Korea’s Kospi index fell 0.5%.
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