On Tuesday, US equities reached record highs and the dollar hit a fresh 14-year peak as markets shrugged off risk aversion following attacks in Germany and Turkey. Since the November 8 election, US stocks have been on the rise, with the S&P 500 rising nearly 6 percent on bets that President-elect Donald Trump’s plans for deregulation and infrastructure spending will help to boost businesses.
On Wall Street the Dow .DJI and Nasdaq .IXIC reached record intraday highs, with the blue-chip index closing in on the 20,000 level. European stocks steadied as reassurance over Italy’s plan to spend up to 20 billion euros ($21 billion) to rescue its troubled banks overtook uncertainty over the attacks.
Hussein Sayed, chief market strategist at FXTM commented, “Investors have become so fast in digesting bad news, and this explains the resilience in financial markets,”
The Dow Jones industrial average .DJI rose 95.24 points, or 0.48 percent, to 19,978.3, the S&P 500 .SPX gained 7.88 points, or 0.35 percent, to 2,270.41 and the Nasdaq Composite .IXIC added 24.41 points, or 0.45 percent, to 5,481.85.
The pan-European STOXX 600 closed up 0.48 percent, with the German DAX .GDAXI, French CAC 40 .FCHI and British FTSE 100 .FTSE all adding gains. Emerging market shares edged up .MSCIEF while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.3 percent.
In contrast, China’s CSI 300 index .CSI300 went down by 0.6 percent on Beijing’s move to tighten supervision of shadow banking activities and on liquidity concerns, and Japan’s Nikkei .N225 closed up 0.5 percent after a late rally linked to the Bank of Japan’s decision to maintain to its -0.1 percent interest rate on some deposits and ultra-loose monetary policy.
The BOJ’s widely expected hold also sent the yen tumbling against the dollar. The yen was last down 0.6 percent against the dollar.
The dollar .DXY tracked US bond yields higher US10YT=RR, as the strong appetite for risk assets pushed traders out of bonds and into stocks. On Monday, Federal Reserve Chair Janet Yellen made positive comments on the state of the US labor market and also cited this as a reason for the dollar’s growing strength.
“She didn’t use the opportunity to take the market back from being overly hawkish,” said UBS currency strategist Constantin Bolz, in Zurich. “Maybe there were some people who … thought they would hold off from further dollar longs until she spoke, in case she were to row back.”
Simultaneously, oil prices hit one-week highs on anticipation of a decline in US crude stocks. Brent crude LCOc1 was last up 0.7 percent at $55.32 a barrel while WTI crude CLc1 added 0.36 percent to $52.31 a barrel.