BackS&P 500 climbs as dollar gains on Republican win; gold retreats
S&P 500 advanced 0.3% in New York, poised for a record close
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London/New York: The Standard & Poor’s 500 Index approached a record as Republicans won control of the Senate while the dollar strengthened and precious metals fell. European stocks gained on better-than-estimated earnings.
The S&P 500 advanced 0.3% at 9:47 am in New York, poised for a record close. The US currency appreciated to a seven-year high against the yen. The yield on 10-year treasuries rose 2 basis points to 2.36%. The Stoxx Europe 600 Index jumped 1.3%. Gold dropped to the lowest price since April 2010 as assets in the largest exchange-traded product backed by the metal dropped to a six-year low. The ruble slid as the central bank moved closer to allowing the currency to trade freely.
Republicans picked up seven Senate seats and more were possible, positioning Mitch McConnell, the chamber’s Republican leader since 2007, to set the legislative agenda for the final two years of Barack Obama’s presidency. A private report showed companies added more workers in October than the previous month, before the labour department payrolls data later this week. The European Central Bank (ECB) is set to meet on Thursday for the first time since the Bank of Japan extended its record stimulus.
“With the election results, the strong ISM manufacturing result from the other day and today’s employment report, it continues to improve investor sentiment," Robert Pavlik, who helps oversee $4.5 billion as chief market strategist at Banyan Partners LLC in New York, said in a phone interview. “The market also likes the fact that the ECB might deliver some additional quantitative easing-type measures."
The S&P 500 closed on Tuesday within 0.3% of a record reached on 31 October and has rallied 9.3% this year.
Midterm Rally
Fourth quarters of midterm years have produced an average gain of 8% in the past 65 years, according to the Stock Trader’s Almanac. They’ve been followed by rallies of almost that much in the next three months, making the average 16% two-quarter rally the best combination of the election cycles.
The S&P 500 has risen an average 15.1% in calendar years when a Democratic president has been opposed by a Republican-controlled Congress since 1945, according to S&P Capital IQ equity strategist Sam Stovall. To be fair, the returns are nearly identical when Republicans control both the White House and Congress.
“Republicans are seen as more business friendly, so it’s not surprising if markets react positively to the mid-term results," Veronika Pechlaner, who helps oversee about $2.3 billion at Ashburton Ltd., said by phone from Jersey, the Channel Islands. “It could make it easier for decisions to be passed, and clearer decision-making is a good thing in US politics."
Jobs Report
Companies in the US added 230,000 workers to payrolls in October, figures from ADP Research Institute showed on Wednesday. The median forecast of 44 economists surveyed by Bloomberg called for an increase of 220,000.
More than eight shares advanced for every one that declined in the Stoxx 600, which has rebounded 8.3% from this year’s low reached on 16 October.
Marks & Spencer Group Plc rallied 8.8%, the most since March 2013, after the UK’s biggest clothing retailer raised its forecast for full-year profitability. Hannover Re gained 1.4% as the world’s third-largest reinsurer by market value reported a 21% jump in profit.
Natixis SA climbed 2.4% after saying profit jumped 10% helped by higher asset-management and insurance revenue. Outokumpu Oyj dropped 7.5%, dragging a gauge of European commodity producers down for a third day. The Finnish steelmaker reported a third-quarter net loss that was wider than analysts predicted.
Emerging Markets
The MSCI Emerging Markets Index fell for a third day, slipping 1%, led by commodity producers and technology shares.
Dubai led declines worldwide, with the DFM General Index falling 3.3%. Abu Dhabi’s benchmark gauge declined 2.4% and Saudi Arabia’s Tadawul All Share Index of the Arab world’s largest bourse slid 1.6%.
The ruble slid 1.7% to 44.36 per dollar, after dropping as much as 3.2% to 44.98. The Micex index of stocks was little changed. Russian markets were closed on Tuesday for a public holiday.
The Bank of Russia said that while it was abandoning its previous currency-intervention policy and will spend $350 million only once a day, it may conduct additional interventions of an undisclosed size to ward off “threats" to the country’s financial stability. The currency pared losses after the bank said it didn’t exclude more interest rate increases.
Ukraine Bonds
Ukraine’s July 2017 Eurobond fell for a third day, sending the yield 12 basis points higher to 15.12%. The rate has climbed 173 basis points this week.
President Petro Poroshenko will ask parliament to revoke a law giving more autonomy to regions occupied by pro-Russian separatists after the rebels held elections on the weekend that were condemned by the US and the European Union.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 1%, the most in three weeks. The Shanghai Composite Index lost 0.5%, falling for the first time in seven days.
The dollar is extending its lead as the year’s best- performing major currency as the US economy gains momentum. It reached ¥114.78 on Wednesday, the highest in almost seven years, adding to gains after Bank of Japan governor Haruhiko Kuroda said he saw no limit to the steps the central bank may take to defeat deflation. The US currency reached $1.2467 per euro, approaching its strongest level in two years.
UK Services
The pound fell as much as 0.8% to $1.5869, the lowest level in almost a year as a survey of purchasing managers showed growth at UK service companies slowed to the least in 17 months in October.
Average yields on investment-grade bonds in euros fell to a record, while yields for junk borrowers declined to the lowest since 26 September, according to Bank of America Merrill Lynch data. Investment-grade bonds in euros yield 1.91 percentage points less than notes in dollars, the widest spread in six years and approaching the biggest gap since 2005, the data show.
Gold Slides
Gold tumbled 2.1% to $1,143.90 an ounce. Silver dropped 3.9%, platinum slid 1.9% and palladium lost 2.9%.
Holdings in the SPDR Gold Trust slid 0.3% on Tuesday to 738.8 metric tonnes, the lowest since September 2008 when Lehman Brothers Holdings Inc. collapsed, as falling oil prices and the end of bond buying by the Fed diminished demand for the metal as an inflation hedge.
The Bloomberg Commodity Index slumped 0.7% to its lowest in more than five years as copper, aluminium and nickel fell at least 1.1% in London trading.
Brent crude oil slid as much as 1.4% to $81.63 a barrel, the lowest since October 2010, while West Texas Intermediate (WTI) contracts rose 0.4% after reaching a three-year low on Tuesday. The weighted average of the main crude grades produced by the Organization of Petroleum Exporting Countries (Opec) fell below $80 a barrel for the first time in four years.
Saudi oil minister Ali Al-Naimi will attend a conference in fellow Opec member Venezuela on Thursday, according to embassy officials in Caracas. Venezuela is preparing a proposal to defend the oil price for Opec’s 27 November meeting, President Nicolas Maduro said in comments broadcast on state television on 31 October. Bloomberg
Ben Sharples in Melbourne, Weiyi Lim and Jonathan Burgos in Singapore, James Herron, Srinivasan Sivabalan, Abigail Moses, Paul Dobson and Namitha Jagadeesh in London, Emma O’Brien in Wellington and Nick Gentle in Hong Kong also contributed to this story.
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