Stocks Climb, But Still on Track for Sharp Weekly Losses
June 22 2018 - 10:13AM
Dow Jones News
By Riva Gold
-- Crude oil rises as OPEC meets
-- Dow rises after eight straight losses
-- Biggest weekly outflows from EM equities since 2016
A jump in oil prices helped boost stock markets Friday, but
major indexes remained on track for weekly losses as escalating
trade friction led investors to reassess the outlook for
growth.
The Dow Jones Industrial Average jumped 145 points, or 0.6%, to
24606, rebounding after falling for an eighth-straight session
Thursday, its longest streak of declines in more than a year. The
S&P 500 added 0.3% and the Nasdaq Composite rose 0.3%.
U.S. crude oil jumped 3.3% to $67.73 a barrel after OPEC members
tentatively agreed to a deal to join other big producers in adding
around 600,000 barrels a day of oil to global markets. Ministers
went into the Friday meeting with an official target of boosting
production by one million barrels a day.
While higher oil prices can hurt consumers as they pay more at
the pump, they also tend to support shares of energy producers and
equipment providers and can drive business investment, analysts
said.
Shares of Chevron and Exxon Mobil led gains in the Dow, rising
1.9% and 1.6%, respectively.
Despite the day's gains, most stock markets remained on track
for sharp weekly losses. The Stoxx Europe 600 rose 0.8% Friday but
was poised to end the week 1.3% lower, while the Dow was poised to
lose 2.5% and the Shanghai Composite Index dropped 4.4%, its worst
week since February.
The possibility that trade tensions could damage growth and hurt
stocks has become more real to investors in recent sessions after
President Donald Trump called for a fresh round of tariffs on $200
billion of Chinese goods.
German auto maker Daimler meanwhile issued an unexpected profit
warning late Wednesday saying Chinese retaliatory import duties on
vehicles built in the U.S. would hurt sales and earnings.
"We're starting to see some corporate impact to some of the
rhetoric coming out of Washington," said Barbara Reinhard, head of
asset allocation at Voya Investment Management. "Potentially
targeting the auto sector has a far greater economic impact than
anything that has been done so far."
As investors broadly shed risk, investors withdrew the biggest
weekly amount from emerging-market equities, financials and
investment-grade bond funds since 2016, according to Bank of
America Merrill Lynch.
Japan's Nikkei Stock Average fell 0.8% Friday and 1.5% for the
week, while Hong Kong's Hang Seng Index fell 3.2% for the week.
When it comes to trade risks, "I'm more worried about financial
conditions tightening than the direct impact," said Thomas Costerg,
economist at Pictet Wealth Management, referring to risks that the
uncertainty causes stocks to fall, credit spreads to widen and
business confidence to weaken.
"There is a risk that markets think things get out of control
and China imposes non-tariff barriers [...] but I think we'll end
up at a negotiated solution and the direct impact is limited, a bit
like a tax on the U.S. consumer," he added.
On Friday, U.S. bank stocks rose after the Federal Reserve said
Thursday that the largest U.S. banks were healthy enough to
withstand a severe economic downturn.
Banks were also supported by higher government bond yields,
which tend to boost lending income. Yields on 10-year Treasurys
rose to 2.922% from 2.899% Thursday afternoon. Yields rise as
prices fall.
Meanwhile, the dollar came under pressure as European currencies
strengthened.
The euro was up 0.4% against the dollar after data showed
business activity in the eurozone picked up for the first month in
five.
"Politically, Europe is in a trickier spot than it has been for
a while, but flash estimates tell us the first-quarter slowdown was
probably somewhat of a temporary blip," said Tim Graf, head of
macro strategy for EMEA at State Street Global Markets.
The British pound was up 0.2% against the dollar, adding to
Thursday's gain after the Bank of England's chief economist Andy
Haldane joined dissenters voting for a rate increase, pushing up
expectations for a possible rate rise this summer.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
June 22, 2018 09:58 ET (13:58 GMT)
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