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While you were sleeping: Stocks climb on both sides of Atlantic, oil rebounds

Tuesday 13th February 2018

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Equities on both sides of the Atlantic advanced, as US Treasury yields stemmed their climb, offering some reprieve from concern about rising interest rates. 

In 1pm trading in New York, the Dow Jones Industrial Average rallied 1.8 percent, while the Nasdaq Composite Index increased 1.5 percent. In 12.46pm trading, the Standard & Poor’s 500 Index gained 1.4 percent.

Wall Street’s fear gauge—the CBOE Volatility Index or the VIX—dropped 7.3 percent to 26.94 as of 12.55pm in New York.

“The base case here is that the fundamentals are just as good as they were in January, before the volatility started,” Michael Purves, the chief global strategist at Weeden & Co, told Bloomberg. “But the surface is going to be choppier.”

The Dow rose, led by gains in shares of Apple and those of American Express, recently up 3.7 percent and 2.9 percent respectively. Shares of General Electric fell, recently down 0.7 percent and the only stock in the Dow to trade weaker. 

Equity valuations remain a concern. 

“There is a ‘macro floor’—in that the run of macro data is still strong,” Inigo Fraser-Jenkins, who leads Sanford C Bernstein’s global quantitative strategy team, told Bloomberg. “What we do not have is a valuation floor.”

US Treasuries slipped, lifting the yield on the 10-year note one basis points higher to 2.86 percent. 

Investors will closely watch the latest report on the US consumer price index, due Wednesday, to help gauge the potential for an acceleration of Federal Reserve interest rate increases, a key worry that helped spark the recent selloff on equity markets.

“There are some open doors left, notably, where interest rates are and where they are heading,” Eric Freedman, chief investment officer for US Bank Wealth Management, told Reuters. “So while there has been some relief in some assets we don’t think the ”all clear“ has been sounded just yet.”

The latest corporate earnings added to optimism. Shares of Restaurant Brands International jumped, trading 6.6 percent higher as of 12.24pm in New York, as better-than-expected sales at its Burger King chain bolstered its quarterly profit. 

Comparable sales at Burger King climbed 4.6 percent in the fourth quarter, Restaurant Brands said in a statement. Analysts had predicted a 2.5 percent gain in same-store sales at Burger King, according to Consensus Metrix, Bloomberg reported. 

The company also owns Tim Hortons and Popeyes.

“The continued growth prospects for each of our three iconic brands excites us, and we believe we have the right strategy in place to create further value for all of our stakeholders over the long run," Daniel Schwartz, chief executive officer of Restaurant Brands, said in the statement.

In Europe, the Stoxx 600 Index climbed 1.2 percent. Germany’s DAX Index rose 1.5 percent, France’s CAC40 Index gained 1.2 percent, while the UK’s FTSE 100 index also added 1.2 percent.

Oil also gained, recovering following last week’s slide. Strong demand for crude coupled with restrained production from OPEC and allied suppliers will erase any remaining glut, United Arab Emirates Energy Minister Suhail Al Mazrouei, who’s also president of the cartel, said Monday, while Kuwait’s oil minister said global demand is robust enough to absorb growing output from US shale fields, Bloomberg reported. 

“Ultimately, the market is well-supported around $60,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, told Bloomberg. “We do see the market rebalance. Inventories will continue to drop.”


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