(Bloomberg) — U.S. stocks rose to a record and the dollar fell as traders pushed back bets on higher interest rates amid uneven growth in the world’s largest economy. Oil rallied.
All three American equity benchmarks also climbed amid deal activity and as crude oil extended gains to boost commodity producers. Emerging-market stocks advanced for an eighth straight day as Russian shares rallied to their all-time high. The dollar declined against most of its major peers, while the British pound fell to the lowest level on a closing basis since 1985 on speculation data will show the U.K.’s decision to leave the European Union has negatively affected the economy.
Traders have piled into global equities as data in the world’s biggest economies are fueling optimism that central banks will come to the rescue by way of additional stimulus and looser monetary policy. Better-than-estimated corporate earnings have also helped lift stocks in the past month, boosting valuations. While the S&P 500 price relative to future earnings has climbed to the highest since 2002, volatility with American shares was still near all-time lows.
“Stocks have retained a hot pitch and there’s a lot of demand for equities,” said Andrew Brenner, the head of international fixed income for National Alliance Capital Markets. “The question is how you make money in a low interest rate environment, and equities might be expensive, but they’re the least dirty shirt.”
STOCKS
The S&P 500 advanced 0.3% at 4 p.m. in New York, after U.S. equities slipped from their highs on Friday following disappointing retail sales and consumer confidence data. A report Monday showed manufacturing activity in the New York region unexpectedly contracted this month, while a gauge on homebuilder sentiment climbed.
Copper miner Freeport-McMoRan paced gains in raw-material shares. Post Properties jumped after Mid-America Apartment Communities agreed to buy the company for about $3.9 billion. Xylem also climbed after agreeing to acquire Sensus for about $1.7 billion to enhance technology offerings in water distribution and treatment.
The MSCI Emerging Markets rose to the highest level since July 2015. Russia’s Micex climbed as rebounding oil prices lured investors to the cheapest stocks among developing nations. A gauge of Chinese real-estate companies jumped after stake purchases by China Evergrande Group fueled optimism of more mergers.
European shares were little changed as investors assessed recent gains in light of the outlook for earnings and economic growth. Rebounding automakers posted the best performance of the Stoxx Europe 600’s 19 industry groups. Volkswagen AG’s advance buoyed Germany’s DAX, which entered a bull market last week, to within 0.1% of recouping its 2016 losses. BP led oil stocks higher.
CURRENCIES
The dollar extended last week’s slide as investors became less confident about a 2016 interest-rate increase before the release of the minutes of the Fed's July meeting on Wednesday. The greenback slumped almost 5% this year in the absence of signs that U.S. policy makers are set to further diverge from the Bank of Japan and European Central Bank, which are boosting monetary stimulus.
“The market really has not moved to price in any more chance of Fed tightening,” said Daniel Katzive, the head of foreign-exchange strategy for North America at BNP Paribas. “That’s sapped the dollar of any momentum.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, fell 0.2%.
Sterling dropped before reports on inflation, retail sales and unemployment benefit claims for July, which will provide more detail on how the economy is faring after the June 23 Brexit referendum.
BONDS
The Treasury 10-year note yield increased four basis points to 1.56%, according to Bloomberg Bond Trader data.
BlackRock is reducing its exposure to long-dated Treasuries as increased hedging costs from Japan to Europe make the debt less alluring to some foreign investors. Yields on benchmark U.S. 10-year notes are negative for Japanese buyers and about zero for euro-based investors who pay to eliminate currency fluctuations from their returns.
“We’ve reduced some of our exposure to 10-year Treasuries, to the back end of the yield curve,” because of costs to hedge currency risk, said Rick Rieder, chief investment officer for global fixed income at BlackRock, in an interview on Bloomberg Television. “It’s a big deal that it’s become expensive to hedge. The buying will continue, but not nearly at the pace it has.”
COMMODITIES
Oil climbed amid speculation that crude producers will revive talks to stabilize prices. West Texas Intermediate for September delivery advanced 2.8% to settle at $45.74 on the New York Mercantile Exchange.
Crude has rallied more than 10% since closing below $40 a barrel and tumbling into a bear market earlier this month. Saudi Arabian Energy Minister Khalid Al-Falih said in a statement last week that talks with members of the OPEC and other producers may result in action to stabilize the market, according to the state-run Saudi Press Agency.
"It’s really a question of whether the fundamental picture is going to improve and help us with a rally," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Conn. "We’ll find out if we’re going to see a continued rebalance in the market, a tightened supply and demand picture, in the coming weeks."
Nickel rebounded from the lowest closing price in a month as UBS said the full impact of mine shutdowns in the Philippines is still to come. Gold, silver and copper also advanced.
