U.S. stocks climb as dollar gains on Republican win; gold drops

NEW YORK – U.S. stocks rose as Republicans won control of the Senate while the dollar strengthened and precious metals fell. European stocks gained on better-than-estimated earnings before tomorrow’s central bank meeting.

The Standard & Poor’s 500 Index advanced 0.3 percent at 10:29 a.m. in New York, while the Dow Jones Industrial Average climbed 0.2 percent to a record. The U.S. currency appreciated to a seven-year high against the yen. The yield on 10-year Treasuries rose 1 basis point to 2.34 percent. The Stoxx Europe 600 Index jumped 1.3 percent. 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 Labor Department payrolls data later this week. The European Central Bank is set to meet tomorrow 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.”

- Advertisement -

The S&P 500 closed yesterday within 0.3 percent of a record reached on Oct. 31 and has rallied 9.1 percent this year.

Midterm rally

Fourth quarters of midterm years have produced an average gain of 8 percent 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 percent two-quarter rally the best combination of the election cycles.

The S&P 500 has risen an average 15.1 percent 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 U.S. politics.”

Jobs report

Companies in the U.S. added 230,000 workers to payrolls in October, figures from ADP Research Institute showed today. The median forecast of 44 economists surveyed by Bloomberg called for an increase of 220,000.

Separate data showed service industries in the U.S. sustained a faster pace of expansion in October than in the first half of the year. While the Institute for Supply Management’s non-manufacturing index decreased to 57.1 from the prior month’s 58.6, readings greater than 50 signal growth and last month’s outcome exceeded the 54.4 average for the first six months of 2014.

More than six shares advanced for every one that declined in the Stoxx 600, which has rebounded 8.2 percent from this year’s low reached on Oct. 16.

European stocks

Marks & Spencer Group Plc rallied 8.9 percent, the most since March 2013, after the U.K.’s biggest clothing retailer raised its forecast for full-year profitability. Hannover Re gained 2 percent as the world’s third-largest reinsurer by market value reported a 21 percent jump in profit.

Natixis SA climbed 2.3 percent after saying profit jumped 10 helped by higher asset-management and insurance revenue. Outokumpu Oyj dropped 10 percent, 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 1.1 percent, led by commodity producers.

Dubai led declines worldwide, with the DFM General Index falling 3.3 percent. Abu Dhabi’s benchmark gauge declined 2.4 percent and Saudi Arabia’s Tadawul All Share Index of the Arab world’s largest bourse slid 1.6 percent.

The ruble slid 3 percent to 44.92 per dollar, after dropping as much as 3.2 percent to 44.98. The Micex index of stocks was little changed. Russian markets were closed yesterday 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 percent. 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 U.S. and the European Union.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 1 percent, the most in three weeks. The Shanghai Composite Index lost 0.5 percent, falling for the first time in seven days.

The dollar is extending its lead as the year’s best- performing major currency as the U.S. economy gains momentum. It reached 114.84 yen today, 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 U.S. currency reached $1.2457 per euro, approaching its strongest level in two years.

The pound fell as much as 0.8 percent to $1.5869, the lowest level in almost a year as a survey of purchasing managers showed growth at U.K. 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 Sept. 26, 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 2.2 percent to $1,142.40 an ounce. Silver dropped 3.6 percent, platinum slid 2 percent and palladium lost 3.6 percent.

Holdings in the SPDR Gold Trust slid 0.3 percent yesterday to 738.8 metric tons, 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 percent to its lowest in more than five years as copper, aluminum and nickel fell at least 0.9 percent.

Brent oil slid as much as 1.4 percent to $81.63 a barrel, the lowest since October 2010, while West Texas Intermediate contracts rose 0.9 percent after reaching a three-year low yesterday. The weighted average of the main crude grades produced by the Organization of Petroleum Exporting Countries 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 tomorrow, according to embassy officials in Caracas. Venezuela is preparing a proposal to defend the oil price for OPEC’s Nov. 27 meeting, President Nicolas Maduro said in comments broadcast on state television Oct. 31.

No posts to display