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Monday, January 24, 2022

Equities rise as euro recovers and dollar weakens

Equities rise as euro recovers and dollar weakensNEW YORK: A long-awaited recovery in the euro boosted stock markets around the world on Monday as strength in the currency corresponded with a drop in the US dollar that eased concerns about the greenback’s impact on corporate profits.

Oil prices, meanwhile, fell again, with US crude hitting a six-year low on worries about over-supply.

The euro, which has lost roughly a quarter of its value against the dollar since mid-2014, fell to its lowest since January 2003 early in the global session. But many investors say the weakness in the currency, which suffered its biggest weekly fall since September 2011 last week, has been overdone.

That view was given voice by Italy’s central bank governor, who expressed concerns about the pace of the currency’s fall. It rose 1 percent to $ 1.06 after his comment as the European Central Bank launched quantitative easing.

The US dollar index, which measures the greenback against a basket of currencies, fell 0.76 percent.

The strength in the dollar “has put a lot of worry on (equity) investors,” said Nick Colas, chief market strategist at brokerage ConvergEx, in New York.

“We’re looking for a floor for the euro and are just happy it’s not plummeting like it has been for the last six months.” European shares rose 1.0 percent, while Germany’s DAX rose 2.5 percent to a record 12,220 before easing slightly.

The MSCI International ACWI Price Index was up 0.9 percent.

The Dow Jones industrial average was up 180.27 points, or 1.02 percent, at 17,929.58.

The Standard & Poor’s 500 Index was up 20.10 points, or 0.98 percent, at 2,073.50.

The Nasdaq Composite Index was up 39.85 points, or 0.82 percent, at 4,911.61.

The benchmark 10-year US Treasury note was up 7/32, the yield at 2.084 percent.

Investors were looking ahead to the Federal Reserve’s policy decision on Wednesday.

Recent weak US inflation and retail sales data have not derailed expectations the Fed will tighten monetary policy.

Views that higher rates and a stronger dollar will hit US corporate profits have been a drag on shares, with the S&P 500 down for three straight weeks.

“You’re going to have a thin market that’s pushed around pretty easily” ahead of the Fed’s commentary, said Joseph Benanti, managing director at Rosenblatt Securities in New York.

Monday’s rally is “just a little bit of relief from last week’s sell-off.”

Many investors expect the Fed to remove its pledge to remain “patient” about raising rates for the first time since 2006. Economists polled by Reuters split almost evenly on whether a rate increase will come in June or later in the year.

US crude dropped 3.1 percent to a six-year low of $ 43.44 per barrel on expectations of oversupply.

The International Energy Agency said on Friday a global glut of oil is growing and US production shows no sign of slowing. Brent was down 2.9 percent at $ 53.04, the 10th decline in the past 11 sessions.

Silver fell 0.3 percent while copper was flat.

Copyright Reuters, 2015

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