Dollar hits new 2018 peak as stocks rally


Monday 16.00 BST

What you need to know

  • Dollar jumps to fresh high in 2018
  • Wall Street stocks climbing, buoyed by energy groups
  • Oil at 4-year highs above $76 on Iran-US rhetoric
  • European stocks firmer in wake of Nestlé-Starbucks tie-up
  • Turkish lira sinks as EM currencies take a further hit
  • Asia equities led higher by China rally
  • Bunds in demand on weak German factory orders

Hot topic

The US dollar rose to fresh highs for the year while global stocks are rallying as energy groups are pushed upwards by four-year peaks for crude oil prices.

Wall Street is climbing on Monday with the S&P 500 rising 0.6 per cent. News that Nestlé is paying $7.15bn for the rights to market products of Starbucks is also buoying sentiment for equities in European trading.

Currencies are reacting to further strength for the US dollar index, which hit its highest level in 2018 on Friday and did so again on Monday. The index measures the greenback against a basket of peers.

“The dollar is showing signs of renewed strength into Monday’s North America session with broad gains versus all of the G10 currencies,” said Shaun Osborne of Scotiabank. “The euro appears vulnerable following the release of unexpectedly weak German factory orders data.”

The dollar index is 0.2 per cent higher, helping to push the euro lower by 0.3 per cent to $1.1922 and the Japanese yen down 0.1 per cent to ¥109.20.

Analysts are remaining wary of the prospect a stronger US dollar hurting emerging markets.

The Turkish lira was the heaviest faller on Monday among EM currencies, sliding 1 per cent against the dollar to TL4.2658.

“Shorting the dollar was a crowded trade for much of 2017 but investors betting on dollar weakness have been left wrongfooted by its climb,” said Tai Hui, JPMorgan Asset Management strategist. “As a result, emerging market countries with large current account deficits or other geopolitical uncertainties are under pressure again.”

Equities

Global stocks are firming in the wake of Friday’s US jobs report that reassured markets on the risks of faster rate rises by the Federal Reserve. The FTSE All World index is up 0.5 per cent after the previous session’s strongest gains for a month.

European stocks on the Euro Stoxx 600 are 0.6 per cent higher as Frankfurt’s Xetra Dax climbs 1 per cent to new three-month peaks. The London market is closed for a bank holiday.

Energy stocks were leading the way globally with oil group ExxonMobil rising nearly 3 per cent and the Stoxx 600 oil and gas sector climbing 1.2 per cent.

Asia equities were led higher by big gains in China after a positive lead from Wall Street on Friday when US jobs and wage growth narrowly missed forecasts but Apple surged after Warren Buffett’s Berkshire Hathaway disclosed an increased stake in the group.

China-linked stocks were higher despite worsening US-China trade tensions worrying investors. The CSI 300 index of major Shanghai and Shenzhen stocks finished 1.6 per cent higher.

Commodities

Oil rose to its highest level since late 2014 amid an intensifying of rhetoric between the US and Iran.

The moves for oil prices came after Iranian president Hassan Rouhani warned on Sunday that US president Donald Trump would be making a “historic” mistake if the US were to withdraw from its 2015 nuclear deal with Tehran.

Brent crude, which has also benefited from a lift in US demand and Opec supply cuts this year, is rising 1.5 per cent to $76.01 a barrel, its highest level since November 2014.

US marker West Texas Intermediate gained 1.1 per cent to $70.46 a barrel on Monday, also its highest since late 2014.

Gold is marginally higher at $1,314.80 an ounce.

Fixed income

Yields on 10-year Bunds ticked 3 basis points lower to 0.52 per cent as investors sought the safety of the debt after being unnerved by a surprise fall in German industrial orders for the third month running.

Sovereign debt markets in the US lacked significant direction with the yield on US 10-year Treasuries up 1bp to 2.96 per cent.

Additional reporting by Edward White in Taipei

For market updates and comment follow us on Twitter @FTMarkets



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