July 10, 2018
Stocks Rise Before Earnings as Treasuries Decline: Markets Wrap
Stocks edged higher and Treasuries fell as a lull in the trade war gave investors room to focus on the start of the earnings season. The S&P 500 Index rose for a fourth day, while European shares advanced with help from energy firms as oil held above $74 a barrel. The dollar gained and the euro fell as investor confidence in the region soured. The pound turned higher as Prime Minister Theresa May sought to calm a fractious part after three ministers resigned. Treasury yields advanced for a second session. With fewer trade-war headlines rattling markets since Friday’s imposition of U.S. and Chinese tariffs, investors turn their attention to earnings season in the hope that strong results can complement a recent run of positive economic data. “Strong U.S. growth is leading the global expansion and powering corporate earnings, but uncertainty around the outlook is rising and financial conditions are tightening,” said Richard Turnill, global chief investment strategist at BlackRock Inc. Elsewhere, crude rose in New York as U.S. stockpiles were seen declining for the fourth time in five weeks. A basket of emerging-market currencies gained, while Turkey’s lira climbed after yesterday’s end-of-day tumble as traders came to terms with President Recep Tayyip Erdogan latest power grab.
U.K. Growth Rebounds From Bleak Winter, Consumer Spending Jumps
The U.K. economy is bouncing back from a near standstill in the first quarter and a summer boost to consumer spending is supporting the pickup. Gross domestic product product increased 0.2 percent in the three months through May, the Office for National Statistics said in its first publication of rolling monthly growth figures. In May alone, output gained 0.3 percent, while a report from Barclaycard showed household spending rose at the fastest annual pace in more than a year in June. The figures support Bank of England Governor Mark Carney’s argument that the slump at the beginning of the year was temporary and weather related. Policy makers are considering whether to raise interest rates as early as next month if evidence suggests the U.K. expansion is fast enough to stoke domestic inflation pressures. While the economy is stabilizing, the big uncertainty for the outlook remains politics. Prime Minister Theresa May this week lost two senior ministers in the space of a day, and is under pressure from pro-Brexit lawmakers in her Conservative Party. As the government fights over how to leave the European Union, businesses are furious over the lack of clarity and investment decisions are at risk.
China Factory Inflation Accelerates as Commodity Prices Edge Up
China’s factory inflation accelerated in June as the price of commodities held up. The producer price index rose 4.7 percent from a year earlier, compared with a projected 4.5 percent increase in a Bloomberg survey of economists and a 4.1 percent gain in May. The consumer price index climbed 1.9 percent in June, the statistics bureau said Tuesday, matching the forecast. The rebound in producer prices is unlikely to be sustained, as factory momentum weakens amid uncertain global demand and slower domestic credit expansion. The producer price gauge is forecast to ease to a 3.2 percent gain this year from the 6.3 percent increase last year that helped support global reflation. “Prices of major industrial goods edged up and the year-ago basis was low, which boosted a further improvement in producer inflation,” Wang Jian, an economist at Shenwan Hongyuan Securities Co Ltd., wrote in a recent note. “But June is probably the peak of the PPI rebound.” Base effects from last year were the major reason for the rise of both the PPI and CPI, according to a statement by the National Bureau of Statistics on its website. Carry-over effects from last year contributed 1.5 percentage points to the CPI gains in June, and as for PPI, the base factor made up for 4.1 percentage points, the agency said.