NEW YORK/LONDON/ DUBAI
A global equities gauge rose on Wednesday for a third day in four as bets on more economic stimulus overcame, for now, worries over the rising prospect of a global recession. Strong earnings in the United States and the report of talks on a mega merger in European autos triggered gains in stocks, and the improved risk sentiment drove safe-haven yields higher while the yen and gold edged lower.
Traders expect that the Federal Reserve’s annual Jackson Hole symposium and a Group of Seven summit this weekend will shed light on the next steps policymakers will take to support economic growth. Much depends on what the Fed does with U.S. interest rates, making markets hyper-sensitive to the minutes of its latest meeting, due within the hour. That recent meeting ended with what traders dubbed a “hawkish rate cut,” missing expectations for an even more supportive Fed.
Today’s release of the FOMC minutes could show how the risks related to global trade could warrant further rate cuts, said Edward Moya, senior market analyst at OANDA, pointing to the importance of Fed Chairman Jay Powell’s speech in Jackson Hole expected Friday. Auto shares led European stocks higher after Italian media suggested the merger talks between Fiat Chrysler and Renault have continued despite reports to the contrary.
Across the Atlantic, earnings from Target and Lowe’s boosted consumer-centered stocks and overall market sentiment. The Dow Jones Industrial Average rose 283.4 points, or 1.09%, to 26,245.84, the S&P 500 gained 25.97 points, or 0.90%, to 2,926.48 and the Nasdaq Composite added 77.87 points, or 0.98%, to 8,026.43. The pan-European STOXX 600 index rose 1.21% and MSCI’s gauge of stocks across the globe gained 0.76%.
Emerging market stocks rose 0.40%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.07% lower, while Japan’s Nikkei lost 0.28%. Futures markets have fully priced a 25-basis-point cut in next month’s Fed meeting. On Wednesday, U.S. Treasury yields rose as rising stock prices reflected improving risk sentiment, but flattened ahead of the release of the Fed minutes. Benchmark 10-year notes last fell 1/32 in price to yield 1.5605%, from 1.559% late on Tuesday.
Germany sold 30-year bonds with a negative yield for the first time at an auction on Wednesday, a milestone for a fixed-income market where the entire curve now yields less than zero. The very weak demand seen at the auction was expected. West Texas crude futures were little changed after U.S. government data showed a drawdown in domestic crude stockpiles but rises in refined product inventories, while worries about a possible global recession capped gains in Brent.
U.S. crude rose 0.16% to $56.22 per barrel and Brent was last at $60.66, up 1.05% on the day. In currencies, the dollar rose against the Swiss and Japanese safe-haven currencies and the dollar index fell 0.04%, with the euro up 0.03% to $1.1102. Sterling was last trading at $1.2143, down 0.21% on the day. The Japanese yen weakened 0.23% versus the greenback at 106.49 per dollar.