Global Stocks Regain Ground After Losses

Date : 07/12/2018 @ 1:15PM
Source : Dow Jones News

Global Stocks Regain Ground After Losses

By Ben St. Clair 
   -- Stocks rebound from Wednesday's fall 
   -- China guides currency lower 
   -- Commodity futures rise 

Stocks in Asia and Europe rose Thursday, a day after major global indexes fell amid concerns over escalating trade tensions and falling oil prices.

Futures pointed to a 0.6% opening gain for the S&P 500 and a 0.8% gain for the Dow Jones Industrial Average. The Stoxx Europe 600 was up 0.6% in afternoon trading, led by gains in travel and leisure and media companies.

Shares of oil-and-gas companies were lower, even as Brent crude oil was up 1.1% at $74.23 a barrel Thursday. The global benchmark fell by almost 7% a day earlier on news that Libya would resume exports, its sharpest daily decline since February 2016.

Stocks have continued to seesaw as investors react to developments on trade and await second-quarter earnings, set to come into full swing Friday with U.S. banks reporting results.

The Trump administration said Tuesday it would assess additional tariffs on $200 billion on a variety of Chinese goods, including bicycles, sound systems, refrigerators, pocketbooks, vacuum cleaners, cosmetics, tools and seafood.

The news led to declines across global stocks and commodities, compounded by the falling crude prices.

In Asia, Hong Kong's Hang Seng was up 0.6% while the Shanghai Composite Index rose 2.2%. Japan's Nikkei rose 1.2%.

"We're at a situation where the markets have to react to the uncertainty, " said Jim Smigiel, CIO of absolute return strategies for SEI Investments.

But the market can be driven higher by strong economic data and corporate earnings, said Mr. Smigiel, even if factoring in different trade outcomes remains challenging.

"We think that those fundamentals will be enough to overcome this steady stream of trade war rhetoric and action," he said.

U.S. economic data out Wednesday showed higher inflation. The producer-price index, which measures prices that businesses receive for their goods and services, rose 3.4% from the year before, the largest annual increase since November 2011, the Labor Department said Wednesday

The increase, which was higher than expected, raises the probability of two additional rate rises from the Federal Reserve this year. June data on consumer prices is out later Thursday.

Yields on 10-year Treasurys were up to 2.865% from 2.844% on Wednesday. Yields rise as prices fall.

In Asia, Hong Kong's Hang Seng was up 0.6% while the Shanghai Composite Index rose 2.2%. Japan's Nikkei rose 1.2%.

Hong Kong-listed shares in Chinese telecommunications equipment maker ZTE soared 25% Thursday after the company cleared the last major hurdle to lift U.S. sanctions. The U.S. Commerce Department in April had banned U.S. companies from selling to ZTE as punishment for the company's failure to honor an earlier U.S. agreement over sales to North Korea and Iran.

Thursday's gains in Asian equities came as China guided the yuan to its largest one-day drop against the U.S. dollar in a year and a half. The central bank, which determines a daily dollar-yuan exchange rate and allows the currency to trade within 2% of that level, set the dollar's reference rate at 6.6726 yuan.

A weaker yuan makes Chinese exports more competitive and its goods more valuable abroad.

The yuan has declined 2.5% against the dollar this year as the greenback has strengthened. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, is up over 5% in the past three months, as strong economic data and rising interest rates have helped support it.

In commodities, copper futures rose 1.1% and aluminum futures edged down 0.4% after earlier gains.

Elsewhere in markets, the Turkish lira climbed 1.4%, after steep falls on Wednesday and Monday. Investors have reacted negatively after President Recep Tayyip Erdogan appointed his son-in-law as finance minister and put in place measures that could curb the independence of Turkey's central bank.


(END) Dow Jones Newswires

July 12, 2018 08:00 ET (12:00 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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