NEW YORK (Reuters) – A gauge of global equities edged higher on Wednesday, adding to the prior day’s rally on economic and vaccine hopes, while fresh coronavirus outbreaks and rising geopolitical tensions in Asia boosted demand for the dollar and safe-haven debt.
Optimism over a quick economic recovery has been tempered by more global cases of the coronavirus, including an outbreak in Beijing and a rising tide of infections in U.S. states that are reopening their economies.
U.S. Treasury yields and crude prices fell on concerns over the fresh outbreaks, but also drew some support from stimulus measures and positive tests of a drug trial for dexamethasone that could save some critically ill COVID-19 patients.
The dollar mostly rose as investors wary of wider geopolitical risks sought its relative safety as Federal Reserve Chair Jerome Powell testified for a second day before Congress.
The Fed will use its “full range of tools” to cushion households and businesses, Powell told lawmakers, echoing remarks he made on Tuesday that were welcomed by investors.
Rising tensions between North and South Korea spurred demand for safe havens, as did clashes between Indian and Chinese troops at a disputed border site.
“There’s a bit of afterglow from yesterday,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“You’re seeing some follow-through” on news of a $1 trillion infrastructure program planned by the Trump administration, record retail sales in May and the new drug trial results, he said.
After the sharp 50-day rally in equities from March lows, a period of several months where the market doesn’t do much can be expected, Arone said.
“We’re seeing that struggle, that tug of war, that friction play out already this month,” Arone said. “June hasn’t been a straight shot to the moon. That’s what you’re likely going to see for the balance of the summer, not a bad thing.”
European shares climbed further, adding to their best gains in almost a month a day earlier, but the Nikkei in Tokyo eased 0.5% after posting its biggest daily gain in three months the prior day.
MSCI’s gauge of stocks across the globe gained 0.47% but was likely to be pulled lower as U.S. stocks, which account for more than half the world benchmark’s performance, were mixed.
The pan-European STOXX 600 index rose 0.74% and emerging market stocks rose 0.49%.
On Wall Street, the Dow Jones Industrial Average rose 47.26 points, or 0.18%, to 26,337.24 and the S&P 500 gained 11.37 points, or 0.36%, to 3,136.11. The Nasdaq Composite added 84.48 points, or 0.85%, to 9,980.34.
Chinese blue chips recovered from an early dip to finish steady despite Beijing’s worst resurgence in COVID-19 cases in four months.
“The tension between better economic data and rising COVID-19 cases continues to drive market volatility,” said Antoine Bouvet, senior rates strategist at ING in London.
The dollar index rose 0.145%, with the euro down 0.28% to $1.1231. The Japanese yen strengthened 0.23% versus the greenback at 107.11 per dollar.
Benchmark 10-year notes fell 1.4 basis points to yield 0.7397%. The 10-year German Bund rose 0.7 basis point to yield -0.418. [GVD/EUR]
Oil prices swung in and out of the red amid an increase in U.S. crude inventories.
U.S. crude fell 42 cents to settle at $37.96 a barrel, while Brent settled down 25 cents at $40.71.
Gold prices were little changed, buoyed by concerns over a second coronavirus wave and expectations for low interest rates in the near term. But a firm dollar put a lid on gains.
U.S. gold futures settled slightly down at $1,735.60 an ounce.
Reporting by Herb Lash; additional reporting by Dhara Ranasinghe in London; editing by Bernadette Baum and Jonathan Oatis