Stocks gain ground as Middle East jitters ebb


Thursday 15.30 BST

What you need to know

  • Wall Street opens positively and European markets also moving higher
  • Oil prices choppy amid Middle East tension
  • Dollar firmer as investors digest Fed minutes, euro slides
  • Rouble strengthens after sanctions-driven slide
  • Bourses down in Asia after weak lead overnight from US

Leading quote

“Markets are moving from the relief that the trade war rhetoric has stepped back for now to a realisation that the Middle East rhetoric is stepping up,” said Jim Reid of Deutsche Bank.

“The short-term geopolitical fear has been the dominant theme over the last 24 hours, overshadowing an in-line US CPI [inflation] print and a slightly hawkish set of Fed minutes.”

Hot topic

Wall Street stocks are higher and European markets are folding on to early gains after Asian bourses followed Wednesday’s dip lower amid continued rumblings of geopolitical tension in the Middle East.

The benchmark S&P 500 is up 1 per cent at 2,669 while the Dow Jones Industrial Average is 1.3 per cent higher.

The Europe-wide Stoxx 600 is 0.7 per cent stronger while Germany’s Xetra Dax is up 1.1 per cent and London’s FTSE 100 is 0.1 per cent firmer.

Russian equities are rallying after a tumultuous start to the week. But the dollar-denominated RTS stock gauge is off 10.4 per cent over the course of the week against a 4 per cent fall for the rouble-denominated Moex.

Overnight on Wall Street, the S&P 500 shed 0.6 per cent amid the heightened geopolitical tension and after the minutes from US policymakers’ latest meeting indicated that Federal Reserve officials were considering the possibility of steeper interest rate rises.

Asian equities staged an early climb that later crumbled, leaving the Hang Seng benchmark 0.2 per cent lower on the day. Shares in Chinese state-owned oil firms rose but that was more than offset by a fall in tech stocks. The Shanghai Composite closed 0.9 per cent lower. In Tokyo, the Topix index finished off 0.4 per cent.

New Zealand stocks on the NZX 50 closed 0.6 per cent lower after the country’s prime minister announced it would ban future offshore oil and gas exploration.

Commodities

Oil benchmarks are lower again after bouncing off earlier dips.

International benchmark Brent crude briefly rose above $73 a barrel on Wednesday to its highest level for nearly four years after US president Donald Trump warned Russia to “get ready” for US missiles to be fired at Syria and reports that Saudi Arabia’s air defences had intercepted a “rocket” above Riyadh.

Brent then pulled back later in the Wednesday session from a peak of $73 a barrel to dip below $72. Trading on Thursday has seen the global benchmark move between gains and losses, currently down 1 per cent on the session at $71.36 a barrel.

US marker West Texas Intermediate is 0.9 per cent lower on the day at $66.20.

Gold is down 1.1 per cent, or $14, at $1,338 an ounce after touching $1,365 on Wednesday.

Forex and fixed income

The dollar index, which measures the greenback against a basket of other currencies, is up 0.4 per cent. Sterling is 0.1 per cent higher against the dollar at $1.4193 while the euro is down 0.5 per cent at $1.2302 — unsettled by some disappointing eurozone industrial production data.

“The US dollar is trading broadly higher on the session so far, reflecting a drop back in safe-haven demand as the US has yet to take action on Syria as well as the FOMC minutes yesterday delivering a little more conviction for a June rate hike,” said Shaun Osborne of Scotiabank.

The yen is 0.5 per cent weaker against the dollar at ¥107.36.

The Russian rouble is gaining after plunging earlier in the week in response to the fresh US sanctions on leading Russian companies. In Thursday’s trading, the rouble is 1.1 per cent stronger against the dollar at Rbs61.7975.

A slide in the value of the Hong Kong dollar to the limit of its trading peg against the US dollar led the territory’s de facto central bank to intervene and buy HK$816m of the Asian currency, according to Reuters.

The Hong Kong Monetary Authority is obliged to defend the peg against the US dollar of between HK$7.75 and HK$7.85 — the Hong Kong dollar was trading at HK$7.8499.

In sovereign bond markets, the yield on 10-year US Treasuries is up 3 basis points at 2.82 per cent and equivalent-maturity German Bund yields are 2bp higher at 0.51 per cent.

Additional reporting by Hudson Lockett in Hong Kong

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