1. HSBC, miners lift European shares as dollar holds near 13-month lows

HSBC, miners lift European shares as dollar holds near 13-month lows

Forecast-beating profits at HSBC and strong gains for miners on the back of a two-year high in copper prices lifted European shares on Monday while the dollar edged up off 13-month lows against other major currencies.

By: | Published: July 31, 2017 6:32 PM
HSBC, Europe’s biggest bank, unveiled a 5-percent rise in profits in the first six months of this year and its third share buyback in a year. (Image: Reuters)

Forecast-beating profits at HSBC and strong gains for miners on the back of a two-year high in copper prices lifted European shares on Monday while the dollar edged up off 13-month lows against other major currencies. Wall Street looked set to open higher, according to stock index futures. HSBC, Europe’s biggest bank, unveiled a 5-percent rise in profits in the first six months of this year and its third share buyback in a year, underlining progress in its turnaround plan. Its shares gained as much as 3 percent in London, helping lift an index of European banks by 0.3 percent.

However, the standout performers were mining companies, with an index of their shares up 1.3 percent, as industrial metal copper hit a fresh two-year peak after Chinese data showed that while manufacturing growth cooled slightly this month a push on infrastructure by the government kept construction humming. Copper on the London Metal Exchange last traded at $6,388 a tonne, up 1.0 percent on the day, having risen as high as $6,430. The pan-European STOXX 600 share index rose 0.4 percent, having fallen for the last two trading days.

Shares of tobacco companies weighed on the index, underperforming again after the U.S. Food and Drug Administration proposed on Friday to cut nicotine in cigarettes to non-addictive levels. British American Tobacco fell 4.7 percent, after dropping 6.8 percent on Friday, and Imperial Brands fell 5.9 percent. Asian shares rose as investors largely shrugged off a new North Korean missile test, focusing instead on a data-heavy week ahead.

MSCI’s broadest index of Asia-Pacific shares outside Japan reversed early losses to rise 0.4 percent. Chinese shares rose, buoyed by several leading companies’ forecasts for strong mid-year earnings. The blue-chip index rose 0.5 percent and the Shanghai Composite both rose 0.6 percent.

North Korea conducted a missile test late on Friday that it said proved its ability to strike the U.S. mainland. The U.S. responded by flying two bombers over the Korean peninsula on Sunday. But early jitters dissipated somewhat, with the Korean won reversing losses. The dollar was down 0.3 percent at 1,120 won, after jumping almost 0.7 percent on Friday. South Korea’s KOSPI rose 0.1 percent. The dollar dipped against the safe-haven yen, which traded at 110.54 to the greenback, up 0.1 percent on the day.

CORE INFLATION

The euro fell 0.2 percent to $1.1730, little moved by an unexpected acceleration in core inflation to a four-year high this month. The measure is closely watched by the European Central Bank, which has said it will debate later in the year whether to begin winding back its bond-buying stimulus programme. Its overall inflation target is close to but below 2 percent.

Yields on some lower-rated bonds fell after the data. In normal circumstances higher inflation would push yields higher. “It’s a step in the right direction but not quite enough to make the market reconsider bond prices,” said Mizuho strategist Antoine Bouvet.

Sterling fell 0.1 percent to $1.1316 but stayed near a 10-month high, with investors eyeing “Super Thursday” when the Bank of England announces its latest policy decision and quarterly inflation report. “We expect elements of the rate decision and Inflation Report to contain hawkish tilts, thereby providing some support to the pound,” wrote BMO currency strategists in a weekly note to clients on Monday.

The dollar index, which measures it against a basket of major currencies rose 0.2 percent but held close to 13-month lows touched last week on uncertainty over whether U.S. President Donald Trump will be able to push through his economic agenda and questions over the pace of U.S. interest rate rises. Such concerns have seen speculative bets against the dollar rise to their highest since early 2013, by one broad measure.

“Our short-term positions indicators are flashing red in terms of extreme bets against the dollar, especially against the euro and the Aussie and in this kind of environment, a small negative surprise in data elsewhere can trigger a washout,” said Viraj Patel, an FX strategist at ING in London.

OIL UP ON OPEC MEETING

Oil prices hit two-month highs. An OPEC announcement of a meeting next week of producers from the group and elsewhere to discuss compliance with their oil supply reduction pact added to upward pressure on prices from a threat of U.S. sanctions against Venezuela. This was in response to Sunday’s election of a constitutional super-body that Washington has denounced as a “sham” vote.

Brent crude last traded down 5 cents at $52.47 a barrel, having risen as high as $52.60 earlier on Monday. “The sentiment in the oil market became very bullish after OPEC said it will meet with partners in Abu Dhabi next week to discuss compliance,” said Frank Schallenberger, head of commodity research at LBBW.

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