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US stocks hit record on trade truce; oil rallies

Jul 01 2019 15:57
Laura Curtis, Bloomberg

US stocks rallied to all-time highs, with semiconductor shares leading the charge after President Donald Trump agreed to ease a ban on American companies supplying Chinese tech giant Huawei. Gold, the yen and Treasuries all retreated.

The Nasdaq 100 Index jumped 1.8%, with chipmakers from Micron Technology to Skyworks Solution surging more than 5% on speculation they'll be able to supply on their biggest customers in Huawei.

The gains put the S&P 500 Index and Dow Jones Industrial average on track to surpass all-time closing highs, as industrial and farm stocks joined the trade-fomented advance. Semiconductor shares in Asia and Europe also rallied.

"The odds of another full blown conflict have moderated as the US administration is de-escalating," Sebastien Galy, senior macro strategist at Nordea Investment, wrote in a note on Monday. "That being said, there are still a lot of reasons to be cautious."

Losses in haven assets turned muted overnight after a series of weak factory reports from major economies reaffirmed speculation that global central banks will remain on track with easier monetary policy. US manufacturing data is due after markets open.

The 10-year Treasury yield climbed as much as four basis points before cutting that in half. Gold fell 1%, trimming a plunge that earlier topped 2%.

Crude surged, sending West Texas Intermediate toward $60 a barrel, after major producers agreed to extend output cuts. Stocks in Shanghai and Tokyo led Asian gains, while markets in Hong Kong were closed for a holiday as a new wave of unrest hit the city.

Traders seem cautiously optimistic in the wake of the G-20 gathering, though the move to delay further tariffs and resume talks doesn't offer much clarity on the critical issues. Investors have also been assessing global growth as a series of major purchasing manager readings on Monday morning showed declines. US factory data are also due today.

In Europe, the euro trimmed a decline and European bonds were mixed as data showed manufacturers in the region remained firmly stuck in a slump last month, and as leaders failed again to agree who will fill key European Union roles, including the presidency of the central bank.

Italian bonds surged, reflecting optimism that the European Commission won't penalise the nation this summer over its budget deficit. The pound weakened as a UK factory gauge contracted.

Elsewhere, the lira rallied after Trump indicated he may reassess his threats to sanction Turkey if it goes ahead with a Russian missile purchase. Swiss stocks rose as much as 1.3% as never-before-tested provisions to safeguard liquidity kicked in following a showdown with the European Union. Gold dropped the most in a year.

Here are some key events coming up:

Boris Johnson and Jeremy Hunt continue their campaign to be the next UK prime minister. OPEC+, a wider coalition that includes Russia, is meeting in Vienna. The US celebrates the Independence Day holiday on Thursday. The US jobs report is due Friday and is projected to show nonfarm payrolls rose by 160 000 in June, rebounding from 75 000 the month prior.

And here are the main moves in markets:

Stocks

The S&P 500 Index climbed 1.1% as of 09:31 New York time to the highest on record with the largest increase in almost four weeks. The Stoxx Europe 600 Index gained 1% to the highest in almost two months on the biggest rise in almost two weeks.

The UK's FTSE 100 Index surged 1.3% to the highest in almost 10 weeks on the largest jump in almost 21 weeks. The MSCI Asia Pacific Index climbed 0.8% to the highest in almost two months.

Currencies

The Bloomberg Dollar Spot Index increased 0.2% to the highest in more than a week on the largest climb in more than two weeks. The euro dipped 0.2% to $1.1351, the weakest in more than a week. The British pound declined 0.2% to $1.2669, the weakest in more than a week. The Japanese yen fell 0.4% to 108.29 per dollar, the weakest in almost two weeks.

Bonds

The yield on 10-year Treasuries gained two basis points to 2.02%. Germany’s 10-year yield climbed less than one basis point to -0.33%. Britain’s 10-year yield dipped two basis points to 0.816%.

Commodities

Gold sank 1.2% to $1 393.24 an ounce, the weakest in more than a week on the biggest tumble in more than 11 weeks. West Texas Intermediate crude rose 2.9% to $60.19 a barrel, the highest in almost six weeks on the largest advance in more than a week.

us markets  |  dollar  |  markets  |  oil  |  stocks
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