While you were sleeping: Stocks rise as dollar weakens

Tuesday 12th April 2016

Equities on both sides of the Atlantic advanced as a weakening greenback helped support commodity prices.

Shares of Alcoa rose, up 3.7 percent in New York afternoon trading. The company is set to release its latest quarterly results after the market close, marking the unofficial start of a new US earnings season.

The US dollar fell, touching the lowest level against the yen in 17 months earlier in the day. Federal Reserve policy makers, notably Chair Janet Yellen, have made it clear that they now expect a less number of interest rate increases this year than they did a few months ago.

The Fed’s next two-day policy meeting starts April 26.

"The bottom line is that an April [Federal Open Market Committee] rate hike looks unlikely," Thierry Albert Wizman, global interest rates, and currencies strategist, at Macquarie Group in New York.

Still, he added that the FOMC believes that gradual increases in the federal funds rate over time are still appropriate. “So June is still live,” Wizman noted.

Both gold and oil strengthened, as the US dollar fell, touching the lowest level against the yen in 17 months, and as a report showed China’s producer prices posted the first monthly increase in more than two years.

“The producer-price index number has delivered a signal that [China’s] economy is picking up and the consumer-price index is also acceptable as long as it doesn’t accelerate too fast,” Wu Kan, a fund manager at JK Life Insurance in Shanghai, told Bloomberg.

Wall Street advanced. In 2.30pm New York trading, the Dow Jones Industrial Average rose 0.38 percent, while the Nasdaq Composite Index gained 0.24 percent. In 2.15pm trading, the Standard & Poor’s 500 Index added 0.17 percent.

Even so, Wall Street’s gains might be muted.

“We are likely to remain in a somewhat frustrating environment for both bulls and bears, where we're just not getting data that's materially supportive of either position,” Eric Wiegand, senior portfolio manager at US Bank's Private Client Reserve in New York, told Reuters.

Gains in shares of Goldman Sachs and those of JPMorgan Chase, up 2.3 percent and 1.9 percent respectively, led the rise in the Dow.

In Europe, the Stoxx 600 Index ended the session with a 0.3 percent advance from the previous close, as bank and mining shares rose.

France’s CAC 40 Index rose 0.2 percent while Germany’s DAX Index climbed 0.6 percent. The UK’s FTSE 100 Index slipped 0.1 percent.

“The gains we’re seeing look like a dead-cat bounce—fundamentals look shaky and sentiment is still very fragile,” Michael Ingram, a market strategist at BGC Partners in London, told Bloomberg. “This is more about positioning than investment. Looking at the movers, they seem to be led by banking stocks, so perhaps the news of the Italian central bank and Treasury meeting today on a fund set-up is helping to boost sentiment.”

BusinessDesk.co.nz

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