Market Update & Important Indicators
U.S. stocks rose on Tuesday, boosted by gains in financial and technology stocks. Strong housing data, rising oil prices and increasing confidence that higher interest rates won't undermine stock prices combined to help lift major indexes as investors sold govt. bonds and gold. All 10 S&P 500 sectors rose. Some investors said stocks were still absorbing recent indications that the U.S. Federal Reserve may raise interest rates in coming months. Rising rates are good for banks because they increase the gap between what banks charge on loans and what they pay for deposits, a spread known as the net interest margin. Sales of new homes rose at the fastest pace in more than eight years in April as prices rose, a sign of steady demand and limited supply. Purchases of new single-family homes jumped 16.6% from a month earlier to a seasonally adjusted annual rate of 619,000, the Commerce Department said Tuesday. That is the fastest pace since January 2008.
European stocks rallied, staging a turnaround as financial shares advanced sharply and the euro lost ground against the U.S. dollar. The Stoxx Europe 600 gained 2.2% to close at 344.12, with all sectors gaining ground after sloughing off opening losses. The pan-Euro benchmark on Monday closed 0.4% lower. Regional equities strengthened as the euro traded below $1.12, buying $1.1147 compared with $1.1228 late Monday in New York. The dollar headed higher Monday after some Federal Reserve officials suggested the central bank could resume raising rates as soon as its June meeting. Stocks in the export-heavy German market headed higher, pushing the DAX 30 up 2.2% to 10,057.31. The ZEW Institute's economic-sentiment indicator came in a 6.4 compared with a FactSet estimate of 12. Respondents pointed to uncertainties around decelerating slightly from the strong Q1 reading of 0.7%.
Shares across Asia mostly slid Tuesday as prices of oil and other commodities fell, while investors continued to struggle with uncertainty over the timing of the next U.S. interest increase. Japan's Nikkei Stock Average ended 0.9% lower, and South Korea's Kospi lost 0.9%. Hong Kong's Hang Seng Index closed up 0.1%. Despite the slipping markets, many investors remained skeptical the U.S. Federal Reserve will raise short-term interest rates as soon as June, even after hawkish comments by three Fed officials overnight. materials shares sank across Asia Pacific. Steelmaker Angang Steel Co. fell 4.2%, and oil producer PetroChina Co. fell 2.1% in Hong Kong. Kobe Steel was down 3.9% in Japan. During Asian trading hours, steel rebar futures dropped 2.3% on the Shanghai Futures Exchange, while iron-ore futures fell 3.1% on the Dalian Commodity Exchange.
Australian shares fell Tuesday, mirroring weakness by other Asia-Pacific markets in the wake of comments from Fed official James Bullard supporting U.S. interest rate rise. The S&P/ASX 200 index closed down 0.4%, or 23.3 points, at 5295.6, led lower by financial stocks including the Big Four retail banks. Energy companies also faced renewed selling pressure as oil prices continued to retreat on concerns about oversupply. In the energy sector, falling oil prices continued to weigh on sentiment. July Brent crude on London's ICE Futures exchange–the global benchmark–fell US$0.19 to US$48.16 a barrel in Asian trading amid concerns of a growing global supply as outages around the world are winding down.
Copper futures closed up in London on short covering by investors. The London Metal Exchange's three-month copper contract was up 0.9% at $4,602 a metric ton at the PM kerb close, having hit a two-day high earlier in the session at $4,635 a ton. Gains were capped, however, by a stronger dollar, which made the dollar-denominated metal more expensive for holders of other currencies. The WSJ Dollar Index was recently up 0.23% at 87.70. Amongst other base metals, aluminium closed up 0.1% at $1,556 a ton, zinc closed down at 0.7% at $1,829 a ton, nickel closed up 1% at $18,410 a ton, lead closed down 0.4% at $1,650 a ton and tin closed flat at $15,675 a ton.
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