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Bloomberg
Global stocks advanced while the dollar was little changed amid optimism that the Federal Reserve’s expected rate increase signals confidence that the economy is strengthening. Italian equities and bonds surged on bank recapitalization plans.
The S&P 500 Index rebounded after halting its longest rally since 2014 on Monday. European stocks reached an 11-month high as Italy’s largest lender laid out plans to raise capital. The region’s bonds also gained. Treasuries stabilized with the 10-year yield holding below 2.50 percent for a second day, while the dollar was little changed versus major currencies as the Fed begins a two-day policy meeting. Oil was set for its highest close since July 2015.
Speculation that fiscal easing in the US will drive growth is pushing investors into stocks as governments take the baton from central banks that are starting to scale back a decade of stimulus. With the market assigning 100 percent odds to a Fed rate hike Wednesday, investors are focusing on the path for 2017, and see a two-in-three chance of additional tightening by June.
“There is a strong performance across all equity markets at the moment,†said Andrzej Pioch, who helps oversee $1.3 billion as a money manager at Legal & General Investment Management Ltd in London. “In European stocks there has been a reaction to more clarity coming from Italy. The hike tomorrow is largely priced in.â€
The S&P 500 rose 0.4 percent to an all-time high on a closing basis at 9:31 a.m. in New York, while the Dow Jones Industrial Average climbed 73 points as it nears 20,000. Exxon Mobil Corp. rose 0.8 percent after Donald Trump nominated CEO Rex Tillerson to lead the State Department. The Stoxx Europe 600 Index advanced 0.8 percent to the highest since January, led by a 23 percent surge in Mediaset SpA after Vivendi SA said it may buy a 20 percent stake in the broadcaster. UniCredit was the second-biggest gainer with a 8.7 percent advance. Banca Monte dei Paschi di Siena SpA climbed after a European Union official said the lender may be eligible for a precautionary recapitalization if efforts to plug the private sector fail.
The yen weakened 0.1 percent to 115.10 per dollar, following Monday’s 0.3 percent climb. The euro fell 0.1 percent to $1.0620. The pound gained against all of its Group-of-10 peers as a report showed inflation accelerated to the highest level in more than two years.
Italian bonds gained for a second day, with the yield on 10-year bonds falling nine basis points to 1.90 percent. Yields on Treasury notes due in 10 years were at 2.45 percent. The securities ended Monday little changed after rising by as much as six basis points to touch 2.53 percent, their highest level since September 2014.
Brent crude rose 0.7 percent to $56.09, set for the highest close since July 2015, while West Texas Intermediate oil added 0.6 percent to $53.16.
The International Energy Agency said Tuesday global oil markets will swing from surplus to deficit in the first half of 2017 as OPEC and other producers follow through on an agreement to cut supply. Nickel climbed 1.5 percent $11,465 a ton, and copper fell to a one-week low as stockpiles tracked by the London Metal Exchange posted the biggest two-day gain since June. Gold traded near a 10-month low as investors prepared for the first US rate increase in a year.