Monday 21:00 BST. Wall Street started the week on a solid note, setting yet more record highs as oil prices reached one-month peaks and expectations mounted for further policy accommodation from the world’s central banks.
The dollar remained on the back foot in the wake of Friday’s data-fuelled retreat although sterling dropped below $1.29 for the first time since early July and also touched a three-year low against the euro below €1.15.
But it was US equitiesthat really caught the eye as Wall Street’s three main indices once again set record intraday highs in early trading and secured fresh all-time closing peaks.
The benchmark S&P 500 rose 0.3 per cent to 2,190 after earlier hitting 2,193.81. The Dow Jones Industrial Average also ended 0.3 per cent firmer at 18,635 and the Nasdaq Composite added 0.6 per cent to 5,263.
Activity in Europe’s bourses was thinned by the Assumption Day holiday, with the pan-regional Stoxx 600 index ending flat and Germany’s Xetra Dax managing a 0.2 per cent rise.
But the FTSE 100 in the UK outperformed with a gain of 0.4 per cent — no doubt supported by sterling’s latest bout of weakness.
“The suppression of the returns available from competing asset classes continues to offer essential support to equity markets, nowhere more than in the UK, where gilt yields are plumbing historic lows in response to the latest round of monetary policy stimulus,” said Ian Williams, strategist at Peel Hunt.
But he warned: “All the major FTSE benchmarks are now looking overbought from a technical perspective, with the index relative strength indices pushing into the 70s.”
Asian markets were more mixed, with the Nikkei 225 in Tokyo slipping 0.3 per cent after the latest Japanese GDP report showed the economy expanding far less than expected in the three months to the end of June — heightening talk of further action from the country’s central bank.
And in Shanghai, the composite index jumped 2.5 per cent to a seven-month high as a weak batch of Chinese economic releases on Friday spurred expectations for further stimulus measures from Beijing.
“China’s lending, retail spending, investment, and factory output data have all been relatively disappointing of late, adding to hopes that the Chinese authorities will introduce more strategies to boost economic growth and meet this year’s targets,” said Mihir Kapadia, CEO of Sun Global Investments.
Meanwhile, energy stocks were big gainers in New York as Brent oil jumped another 2.9 per cent to settle at $48.35 — the highest since early July — after rising more than 6 per cent last week.
US West Texas Intermediate was up 3.2 per cent at $45.92.
The latest rally for crude came amid fresh talk of a possible output freeze by major producers. An informal meeting of Opec member countries is scheduled to take place during an energy conference next month.
Some further support for oil prices came from the weaker dollar. The US currency was down 0.1 per cent against a weighted basket of peers as the euro rose 0.2 per cent to $1.1183 and the dollar slipped 0.1 per cent versus the yen to ¥101.22.
The US currency’s weakness helped gold rise $4 to $1,340 an ounce.
The dollar came under pressure on Friday when disappointing US retail sales data prompted the markets to push back expectations for when the Federal Reserve might raise interest rates.
Sterling was an exception to the general rule on Monday, however, as it fell 0.3 per cent against the dollar to $1.2875, and shed 0.5 per cent against the euro to €1.1511 — after earlier hitting €1.1488.
“The counterintuitive behaviour of the pound highlights the fact that this is a currency likely to be driven primarily by different considerations, specific to the uniqueness of the situation the UK has found itself in following the Brexit vote,” said Anthony Karydakis, chief economic strategist at Miller Tabak.
“Its further weakening in the last couple of days can be traced in reports in the British press just before the weekend, presumably from authoritative government sources, suggesting that the UK is not likely to trigger Article 50 until late 2017 — a much longer timeframe than had generally been assumed until recently.”
Meanwhile, US Treasuries gave back some of the gains made on Friday in the wake of the retail sales data. The yield on the 10-year note, which moves inversely to its price, was up 4 basis points at 1.56 per cent while the two-year yield was up 2bp at 0.73 per cent.
The 10-year UK gilt yield edged up 1bp to 0.54 per cent. That compares with 1.38 per cent on the day of the Brexit vote.
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