By Herbert Lash
NEW YORK (Reuters) – The dollar rose on Tuesday amid concerns about a hard deadline for Britain to reach a new trade deal with the European Union, while global equity markets edged higher, lifted by a resurgent U.S. housing market that bodes well for the economy.
European stocks fell from record highs and sterling dropped more than 1% as reports that British Prime Minister Boris Johnson was set to put a no-deal EU exit back on the table.
Johnson will use his control of parliament after last week’s resounding election victory to ban any extension of the Brexit transition period beyond 2020, a bold move that spooked markets.
U.S.-China trade optimism and reassuring Chinese economic data had driven Asian and emerging market stocks to 18-month highs overnight, but stocks tumbled in Europe when markets in London, Frankfurt and Paris opened.
Renewed uncertainty over Britain’s departure from the EU on Jan. 31 failed to carry through to Wall Street. Data showing U.S. homebuilding increased more than expected in November as permits for future home construction surged to a 12-1/2-year high lifted U.S. stocks, albeit modestly.
MSCI’s all-country world index, a global benchmark for equity performance, hit an all-time high, as did the S&P 500, up 27% year to date. The two indices, along with the Nasdaq and the Dow industrials, set record closing highs.
Cash dividends for the benchmark index are set to post a new quarterly record, passing the $500 billion mark for the first time, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
Dividend growth, which has declined, remains significantly higher than wage growth, he said.
Evidence of a global economic revival is increasingly clear, said Jim Paulsen, chief investment strategist at Leuthold Group in Minneapolis, citing U.S., Chinese and European data.
“The financial markets are just being bombarded by great economic reports this week,” he said.
Paulsen pointed to U.S. manufacturing output rebounding more than expected in November, up 1.1%, while industrial output also rose 1.1% last month, according to the Federal Reserve.
The economy’s improving outlook might suffer after Boeing
Boeing shares closed unchanged at $327.00.
The Dow Jones Industrial Average <.DJI> rose 31.27 points, or 0.11%, to 28,267.16. The S&P 500 <.SPX> gained 1.07 points, or 0.03%, to 3,192.52 and the Nasdaq Composite <.IXIC> added 9.13 points, or 0.1%, to 8,823.36.
Stock markets in Shanghai, Hong Kong and Seoul all gained more than 1% while MSCI’s all-country world index surged, putting its gains for 2019 at almost 23%.
The Australian dollar
The RBA has already cut three times since June, taking rates to a record low of 0.75%.
The dollar index <.DXY> rose 0.2%, with the euro
U.S. Treasury yields traded little changed as investors eyed government debt despite the strong U.S. housing data.
The benchmark 10-year U.S. Treasury note
British gilt yields fell further than elsewhere on the latest Brexit worries. The 10-year bond yield dropped 5 basis points to 0.777%
Most 10-year euro zone bond yields were 1 to 2 basis points lower
Oil prices rose more than 1%, supported by hopes last week’s preliminary U.S.-China trade deal will bolster demand in 2020, after the prolonged dispute between the world’s two largest economies dented global growth and market sentiment.
Palladium, which is widely used in catalytic converters for car and truck exhausts, remained a focus, though, as it sped toward $2,000 an ounce for the first time.
Gold prices were steady.
U.S. gold futures
(Reporting by Alistair Bell)