US stocks hit further highs on Tuesday, extending a record run amid signs of progress on US-China trade talks.
The S&P 500 added 0.4 per cent to set a third consecutive record close, having climbed steadily in the last few hours of the session, while the Nasdaq Composite rose 0.8 per cent. Both benchmarks were on course for their fifth straight monthly gain, the S&P having climbed more than 5 per cent in August, with the Nasdaq up nearly 7 per cent.
The Tuesday moves came after the US and China reaffirmed a commitment to their “phase one” trade deal, in a rare sign of co-operation following weeks of wrangling over issues such as the future of Chinese social media platform TikTok in the US.
The weakest reading for US consumer confidence since 2014 tempered some of the optimism around China. The Conference Board’s index unexpectedly fell to 84.8 in August, the lowest level since the coronavirus crisis began, from a revised 91.7 in the prior month.
European stocks ended the day mixed even after data showed business sentiment improving in Germany. The Stoxx Europe 600 slipped 0.3 per cent with German and French benchmarks barely changed. The UK’s FTSE 100 underperformed with a 1.1 per cent decline as mining and energy companies retreated.
Data showed German gross domestic product contracted 9.7 per cent in the second quarter, which was the height of the coronavirus pandemic in Europe, as private consumption, investments and exports collapsed. An earlier reading had, however, shown the economy shrinking by 10.1 per cent between April and June.
Meanwhile, a survey by Germany’s highly regarded Ifo Institute showed sentiment among business leaders in Europe’s biggest economy improved to its highest level since February. The research group’s business climate index rose to 92.6 for August, up from 90.4 in July.
The data boosted the euro, which rose 0.4 per cent against the dollar to purchase $1.1831.
The yield on the 10-year US Treasury, which moves inversely to its price, rose 0.039 percentage points to 0.685 per cent. Germany’s 10-year bond yield rose 0.015 percentage points to minus 0.44 per cent,
Monica Defend, head of global research at asset manager Amundi, said she was “really struggling with the idea that the S&P 500 will continue to climb”. She argued that while markets were pricing in a V-shaped recovery for the US economy, “we are expecting something less resilient”, after US jobless claims rose back above 1m last week.
She added, however, that she expected US inflation, which is traditionally negative for stocks and bonds, to remain low.
Investors are wrestling with contradictory views on inflation, which has become harder for economists to forecast because of the pandemic.
Many are looking to the Jackson Hole meeting of central bank governors, which will be held on Thursday and Friday in a virtual format, for clues.
“We are hoping for more colour on inflation targeting from [Federal Reserve chairman] Jay Powell at Jackson Hole,” Ms Defend said.
The German GDP data were a “final glance in the rear-view mirror”, wrote Carsten Brzeski of ING, predicting a recovery in the July-to-September quarter because of a reduction in value added tax and summer domestic tourism. “The economy will have one of its best quarterly performances ever in the third quarter,” he said.
Shamik Dhar, chief economist at BNY Mellon, said that, while coronavirus cases were once again rising across Europe, hospitalisation and death rates did not appear to be heading back towards the levels seen in March and April.
“The course of the disease remains hugely uncertain and this latest spike may lead to more regional lockdowns,” he said. “But my essential view is that Germany will bounce back”, in part because of pent-up consumer demand.
August delivery contracts for Brent crude, the international oil benchmark, added 1.8 per cent to $45.92 a barrel.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzUxMDYxYzU5LTJiODctNGY3MS04NzQ5LWFjMTZhZDU2YjNlZNIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzUxMDYxYzU5LTJiODctNGY3MS04NzQ5LWFjMTZhZDU2YjNlZA?oc=5
2020-08-25 20:23:00Z
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