US and European stocks were on track to snap five-day losing streaks yesterday, as investors focused on earnings news and mergers and looked past another fall in Chinese equities and sliding oil prices.
Safe-haven government bonds eased in price, while the dollar rallied on growing expectations the Federal Reserve could take a hawkish bias towards raising interest rates in a policy statement due today.
Wall Street’s Dow Jones industrial average rose 37.21 points, or 0.21 per cent, to 17,477.8 in early trade, the S&P 500 was up 5.8 points, or 0.28 per cent, to 2,073.44 and the Nasdaq Composite added 1.78 points, or 0.04 per cent, to 5,041.56.
United Parcel Service shares jumped more than 3.5 per cent and Ford gained 1.5 per cent after each reported better-than-forecast profits.
Merger news helped lift European stocks, with the FTSEuroFirst 300 index of leading European shares up 0.90 per cent at 1,543 points.
RSA Insurance Group jumped 11 per cent after Zurich Insurance said it was considering a bid for the British group, which has a market capitalisation of £4.4 billion.
Shares in Kering meanwhile surged 6.6 per cent after Gucci, the flagship brand of the French luxury and sportswear group, posted a 4.6 per cent rise in underlying second-quarter sales.
“For me, China is a short blip rather than a real slowdown. What we are hearing from company management is pretty buoyant,” said Ingo Speich, portfolio manager at Union Investment in Frankfurt.
The main China indexes fell again, although by nowhere near as much as Monday’s 8.5 per cent plunge. The Shanghai market benchmark closed 1.7 per cent lower.
The Fed kicked off a two-day policy meeting yesterday. No immediate change in interest rates is expected, so attention will focus on whether Fed chair Janet Yellen signals September or December as the most likely date for a rate increase.
Oil remained under pressure. Brent crude futures hit a new six-month low after Monday’s Chinese stock market crash stoked worries the world’s biggest energy consumer may cut back demand, adding to a global supply glut.
Brent fell as much as two per cent to $52.28, a level not seen since February 2. US crude was down 0.35 per cent to $47.27 a barrel after touching its lowest since late March.
The price of copper, heavily influenced by demand from key consumer China, recovered from Monday’s six-year low and was up one per cent at $5,245 a ton on the London Metal Exchange.
In currency markets, the dollar rose against many of its key rivals, including the euro and yen, as traders bet that the first US rate hike in almost a decade is still likely to come in September.
The euro fell 0.5 per cent at $1.1035, almost a full cent down from Monday’s two-week high of $1.1129, and the dollar was up 0.35 per cent against the yen at 123.66 yen.
Bond yields edged higher, with the 10-year US Treasuries off 8/32 in price and yielding 2.2571 per cent. The comparable UK yield rose three basis points, while the yield on the 10-year German Bund was up two basis points.