Bump in commodity shares while solid earnings lift stocks

A gauge of major equity markets around the globe rose to a one-week high yesterday as rising commodity prices and solid earnings reports helped pull shares in Asia, Europe, and the United States higher.

Wall Street stocks rose, led by a slew of stronger-than-expected quarterly reports, including those from Netflix and UnitedHealth.

“The markets are expecting an inflection point as we move from the third to the fourth quarter, and so what they will be parsing in management guidance is for a view that earnings turn positive in the fourth quarter,” said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management.

The Dow Jones industrial average rose 57.29 points, or 0.32 per cent, to 18,143.69, the S&P 500 gained 10.1 points, or 0.47 per cent, to 2,136.6 and the Nasdaq Composite added 43.10 points, or 0.83 per cent, to 5,242.93.

The STOXX Europe 600 Basic Resources index was the top sector gainer in the pan-European STOXX 600 index, as copper rose along with other minerals including gold , after the dollar eased from seven-month highs.

The MSCI all-country stock index, which tracks equity returns in 46 countries, rose to 413.87, its highest since October 11.

A report on US consumer prices showed underlying inflation moderated slightly in September, raising concerns it may take longer than expected for inflation to reach the Federal Reserve’s two-per-cent target.

Fed Chair Janet Yellen said on Friday that the US central bank could allow inflation to run above the target.

Attractive pricing on an expected bond issuance from Saudi Arabia pushed US Treasury yields higher on Tuesday, with benchmark yields near four-month peaks as bond dealers sold US government debt to hedge for the Saudi bonds.

Benchmark US 10-year Treasury notes were last down 2/32 in price to yield 1.775 per cent.

“The Saudi deal. That’s the word on the street,” Aaron Kohli, interest rates strategist at BMO Capital Markets in New York, said of the factor that propelled bond yields higher.

MSCI’s emerging market index rose 1.58 per cent, its biggest gain in nearly four weeks, backed by the expected slower rate of tightening from the Fed and the bump in commodities prices.

Many emerging market countries hold external debt priced in dollars. That debt will be less costly to repay if the Fed is slower to raise interest rates, keeping the value of the dollar constrained.

The dollar was well off its seven-month high against a basket of major currencies, but was flat overall on the day at 97.870.

The day’s major mover in currencies was sterling, which rose to a six-day high against the dollar of $1.2310 after a British government lawyer said it was “very likely” the UK parliament would have to ratify the country’s eventual exit agreement with the European Union.


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