The S&P 500 stock index hit a four-month high yesterday, boosted by higher oil prices and strong earnings, while the US dollar rose against the safe-haven Japanese yen as investors bought riskier assets.
World share markets remained near three-week highs, supported by optimism about US company earnings and the notion that global economic growth can withstand trade tensions.
“The first major earnings report came out, and PepsiCo’s earnings beat expectations and that’s a good start for the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Energy shares were also lifted by oil prices, which rose due to growing supply outages as Norway shut one oilfield amid a worker strike and Libya said production fell by more than half in recent months.
Brent crude – up almost 20 per cent this year – was last at $78.71, up 0.82 per cent on the day. US crude rose 0.22 per cent to $74.01 per barrel.
The Dow Jones Industrial Average rose 128.19 points, or 0.52 per cent, to 24,904.78, the S&P 500 gained 7.66 points, or 0.28 per cent, to 2,791.83 and the Nasdaq Composite added 11.46 points, or 0.15 per cent, to 7,767.66.
Second-quarter US corporate results start in earnest this week and are expected to showcase earnings growth of over 20 per cent across all sectors, thanks to recent tax cuts, high oil prices and robust economic growth.
The pan-European FTSEurofirst 300 index rose 0.41 per cent and MSCI’s gauge of stocks across the globe gained 0.15 per cent.
Investors have not forgotten about the underlying potential for an escalated trade war after China and the US slapped tit-for-tat tariffs on $34 billion worth of each other’s goods. Even so, no fresh salvos have since been fired.
German export figures and Chinese factory gate prices this week have also offered reassurance on economic momentum.
The risk-on sentiment nudged the US dollar towards a six-month high against the yen, with the greenback poised for a further boost if consumer price inflation figures come in higher than expected tomorrow.
The dollar index rose 0.15 per cent, with the euro down 0.18 per cent to $1.1728.
In Britain, sterling has been pressured by fears that Cabinet resignations could lead to rebellion in the ruling party’s ranks, toppling Prime Minister Theresa May or triggering fresh elections.
While this looks unlikely, the uncertainty caused sterling to sink as low as $1.3225 before recovering. However, a Bank of England rate hike may also support the pound, with markets assigning a roughly 60 per cent chance of a 25 basis-point rate hike in August.