WSJ: Stocks Climb on Signs of Momentum in Eurozone Economy
Stocks mostly rose Tuesday, bolstered by fresh signs the eurozone economy remained on solid footing after the U.K. referendum.
Futures pointed to a 0.2% opening gain for the S&P 500, even as crude oil prices dropped for a third consecutive session.
The Stoxx Europe 600 rose 0.8% after surveys suggested the eurozone economy remained resilient in the immediate aftermath of the U.K.’s vote to leave the European Union.
IHS Markit said its measure of private-sector activity rose to 53.3 from 53.2 in July, reflecting a modest improvement. Officials at the European Central Bank are closely watching the health of the eurozone economy ahead of their meeting on Sept. 8.
“It’s too soon to expect much from today’s readings, but the surveys suggest there’s no extra dent in the eurozone recovery caused by Brexit,” said Neil Williams, chief economist at Hermes Investment Management.
Still, “I think we’ve yet to see the worst of the financial market impact of the Brexit process,” he said, citing rising risks that other EU countries could follow the U.K. out the door.
Tuesday’s gains in stock markets came even as Brent crude oil fell 1.2% to $48.58 a barrel. Hopes for a production agreement next month are fading, analysts said, calling a recent rally in the oil price into question.
Goldman Sachs called the summer’s oil price recovery “tenuous” in a note published Monday, arguing that the remaining sources of oil supply disruptions—Nigeria, Iraq and Libya—have all shown signs of increasing output.
A fall in oil prices had sent Wall Street to a slightly lower close on Monday.
In Asian trade, stocks in Japan fell 0.6% as the dollar retreated against the yen, weighing on shares of export-heavy car companies.
Shares in Hong Kong were slightly lower, while Australia’s S&P ASX 200 gained 0.7%, led by major banks as investors focused on company earnings.
Stock market volatility has receded this month in low-volume trade, as investors move past the second-quarter earnings season and look ahead to fresh cues from the world’s central banks.
U.S. stocks have notched record-highs this summer without substantial improvements in earnings growth, amid growing expectations that interest rates will remain lower for longer.
Investors currently see just a 15% chance of a rate rise in September, according to Fed-fund futures tracked by CME Group, although those figures have shifted slightly amid divergent comments from Fed officials.
“What worries me is the complacency on rates,” said Mark Spellman, portfolio manager at Alpine Funds.
“If people are wrong on rates and they start going up, the market is too high--but there’s not a lot of evidence rates will go up a lot,” he said.
Investors are waiting for further clues on that in a speech by Fed Chairwoman Janet Yellen on Friday at a conference in Jackson Hole, Wyo. Her comments could provide fresh direction on the timing of the next rate rise and steer the dollar, which has fallen against all the major currencies this month.
The dollar was last down 0.2% against the yen at ÂĄ100.1540, while the euro was up 0.2% against the dollar at $1.1345. The British pound was up 0.4% at $1.3182, close to a three-week high, as a report on U.K. manufacturing orders beat expectations.
The yield on the 10-year U.S. Treasury note rose to 1.566% from 1.541% on Monday. Yields move inversely to prices.
