Global Markets Continue to Recover
U.S. equities were again solidly higher, joining their foreign counterparts in recovering from the post-Brexit malaise, amid signals of further stimulus measures from the Bank of England, and despite a halt in crude oil’s latest march upward.
Equity news was a mixed bag, headlined by the results of the Fed’s stress test results of the banking sector, as well as confirmation from Hershey that Mondelez offered to acquire the chocolate giant.
Treasuries finished higher, with yields continuing to drift lower, amid a rise in jobless claims and a strong regional manufacturing activity report, while the U.S. dollar and gold were higher.
The Dow Jones Industrial Average rose 235 points (1.3%) to 17,930
The S&P 500 Index gained 28 points (1.4%) to 2,099
The Nasdaq Composite added 63 points (1.3%) to 4,843
In heavy volume, 1.3 billion shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq
WTI crude oil fell $1.55 to $48.33 per barrel and wholesale gasoline was $0.04 lower at $1.50 per gallon
The Bloomberg gold spot price gained $2.65 to $1,321.80 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 96.04
Jobless claims rise, while regional manufacturing activity jumps
Weekly initial jobless claims rose by 10,000 to 268,000 last week, versus the Bloomberg estimate calling for claims to increase to 267,000, as the prior week’s figure was downwardly revised by 1,000 to 258,000. The four-week moving average was unchanged at 266,750, while continuing claims fell by 20,000 to 2,120,000, south of the estimated level of 2,151,000.
The Chicago Purchasing Managers Index snapped back into expansion territory (above 50), jumping to 56.8 in June—the highest since January 2015—from 49.3 in May, and versus expectations of a modest rise to 51.0. New orders and production both improved month-over-month, while employment declined.
Regional manufacturing reports for June have mostly signaled expansion, ahead of tomorrow’s reads on national manufacturing activity in the form of the ISM Manufacturing Index and Markit’s Manufacturing PMI Index, with both forecasted to show 51.3 levels and denote expansion. Most agree that the U.S. economy is fairly healthy and should manage to stay out of recession territory in the near term, although risks have risen. The corporate side of the U.S. private sector continues to struggle to gain momentum, and manufacturing continues to flirt with contraction. The uncertainty associated with Brexit has caused the U.S. dollar to surge again and could exacerbate the manufacturing sector’s problems at least in the short-term. The other item on tomorrow’s economic calendar is construction spending, forecasted to have risen 0.5% m/m during May after declining 1.8% in April.
Treasuries finished higher, as the yield on the 2-year note dropped 5 basis points (bps) to 0.59% and the yield on the 10-year note dipped 3 bps to 1.48%, while the 30-year bond rate was 2 bps lower at 2.30%. Bond yields remain above the lows hit in the aftermath of the U.K. Brexit vote.
Please note: The bond markets will close early tomorrow at 2:00 p.m. ET in observance of the upcoming July 4th holiday.
Europe continues rally as Brexit fallout eases, Asia mostly higher
The European markets finished higher, adding to their three-day rally, despite a pullback in crude oil prices from their recent jump, while the markets continue to recover from the fallout from last week’s vote in the U.K. to leave the European Union. Stocks got an intra-day boost and the British pound and euro both fell as Bank of England Governor Carney said the central bank will likely need to deploy stimulus measures in the wake of the Brexit vote.
U.K. political uncertainty ramped up, exacerbated by the announcement from former London Mayor Boris Johnson that he will not run to become the U.K.’s next prime minister. Bond yields in the region were mostly lower. Financials lagged the broad-based advance after the U.S. subsidiaries of Deutsche Bank AG (DB $14) and Banco Santander SA (SAN $4) failed the Federal Reserve’s stress tests. In economic news, the Eurozone consumer price inflation estimate came in slightly hotter than expected for June.
Stocks in Asia finished mostly to the upside to conclude a mixed quarter in the region, on the heels of yesterday’s continued recovery in the U.S. and Europe from last week’s U.K. Brexit vote shock. Japanese equities ticked higher, though some late-day strength in the yen capped gains, along with a preliminary report showing the nation’s industrial production fell more than expected in May. Mainland Chinese issues ticked slightly lower, while those traded in Hong Kong jumped, as did markets in Australia, with healthcare, oil & gas and financial issues leading a broad-based advance. South Korean stocks rose on the heels of a much stronger-than-expected May industrial production report, and Indian securities moved higher, to complete its best quarter since 2014, bolstered by eased U.S. rate hike concerns and the Brexit recovery, along with recent measures by the government to bolster the economy.
A slew of economic data from the Asia-Pacific region will dominate tomorrow’s international calendar, with items scheduled for release to include CPI, personal income, consumer confidence, wage data and the Tankan Index from Japan, CPI from South Korea, and trade figures from China. In addition, the manufacturing PMIs for the Asian nations will be reported, along with those of most of the European countries, while from across the pond will come PPI from the Eurozone and housing data from Italy.