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Global stocks near record highs, dollar up on optimism, earnings

Published 26/01/2017, 20:20
© Reuters. A trader works on the floor of the NYSE as the Dow Jones Industrial Average passes the 20,000 mark in New York
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By Saqib Iqbal Ahmed

NEW YORK (Reuters) - A key index of global equity markets held near a record high on Thursday, supported by mergers and acquisitions, strong corporate earnings and investor optimism spurred by U.S. President Donald Trump's plans for new public spending.

The dollar rebounded from a seven-week low as investor demand improved with higher global bond yields and stable stock markets. The return of risk appetite in the financial market boosted oil prices.

MSCI's world index (MIWD00000PUS), which tracks shares in 46 countries, was little changed and just 2 percent off its record high hit in April 2015. The index was boosted by strength in Asian and European shares.

On Wall Street, the Dow Jones Industrial Average held well above the 20,000 level after breaching the milestone on Wednesday, buoyed by optimism over U.S. President Donald Trump's pro-growth initiatives and solid earnings.

The S&P 500 and the Nasdaq Composite hit record levels immediately after the open, before easing off their highs to trade little changed on the day.

Early fourth-quarter earnings have boosted sentiment and are now expected to show growth of 7 percent, their biggest increase in two years, according to Thomson Reuters data.

"It is going to be so important to see these earnings come in at or above expectations," said Tim Dreiling, senior Portfolio Manager at the Private Client Reserve at U.S. Bank in Kansas City.

Tech giants Intel (O:INTC), Alphabet (O:GOOGL), Microsoft (O:MSFT) and coffee chain Starbucks (O:SBUX) are scheduled to report results after market close.

The Dow Jones Industrial Average (DJI) rose 43.28 points, or 0.22 percent, to 20,111.79, the S&P 500 (SPX) lost 0.29 points, or 0.01 percent, to 2,298.08 and the Nasdaq Composite (IXIC) added 3.27 points, or 0.06 percent, to 5,659.61.

Qualcomm (O:QCOM) weighed on both the S&P 500 and Nasdaq. The chipmaker fell 5.7 percent after posting a lower-than-expected rise in quarterly revenue.

European shares climbed to a one-year high supported by merger and acquisition-related optimism. Johnson & Johnson's (N:JNJ) $30-billion deal to buy Actelion (S:ATLN) lifted shares in the Swiss biotech firm.

Europe's broad FTSEurofirst 300 index (FTEU3) closed up 0.21 percent at 1,451.12.

The dollar gained against a basket of major currencies as the greenback played catch-up with the recent rally in stocks.

"The impression ... is that the Trump reflation trade may be getting back on track," said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto.

The dollar index (DXY), which measures the greenback against a basket of six other major currencies, was up 0.47 percent at 100.5.

The Mexican peso weakened after Mexican President Enrique Pena Nieto scrapped plans to meet Trump next week after the U.S. president tweeted Mexico should cancel the meeting if it was not prepared to pay for his proposed border wall.

The firmer U.S. dollar pushed gold to a two-week low but expectations that the greenback's climb may be running out of steam helped limit losses.

Spot gold was down 0.95 percent to $1,188.8 an ounce.

U.S. Treasury yields turned lower as solid investor demand at a $28 billion auction of seven-year government debt rekindled demand for the sector.

Benchmark 10-year notes (US10YT=RR) were up 4/32 in price to yield 2.510 percent, down from 2.523 percent late on Wednesday.

Oil prices jumped 2 percent, boosted by the ongoing rally in the U.S. stock market, although gains in crude futures were capped by plentiful supplies and bulging inventories despite efforts by producers to cut output.

© Reuters. A trader works on the floor of the NYSE as the Dow Jones Industrial Average passes the 20,000 mark in New York

Brent crude (LCOc1) settled up $1.16, or 2.1 percent, at $56.24 a barrel, and U.S. crude (CLc1) settled up $1.03, or 2 percent, at $53.78.

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