By Herbert Lash
NEW YORK (Reuters) – World stocks edged higher on Tuesday, lifted by strong earnings from big U.S. drugmakers Merck and Pfizer and expectations of another dose of policy stimulus from the U.S. Federal Reserve, while oil prices pared earlier losses.
European shares slid as they headed toward their worst quarterly earnings in more than three years, according to the latest estimates by Refinitiv, underscoring concerns about the deteriorating health of Europe Inc.
The benchmark U.S. S&P 500 index eked out a fresh record high, led by Merck and Pfizer, though a disappointing profit report from Google parent Alphabet kept the technology-rich Nasdaq in the red.
The index breached its all-time high set in July on Monday, spurred by hopes of a U.S.-China trade deal and expectations of another Fed rate cut.
The steepening of the two- and 10-year yield curve suggests a budding risk-on sentiment among investors, now that some form of a U.S.-Sino trade agreement is likely, said Yousef Abbasi, global market strategist at INTL FCStone Financial in New York.
U.S. President Donald Trump said on Monday he expected to sign a significant part of a trade deal with China ahead of schedule but did not elaborate on the timing.
The spread in the yield curve
A rotation into value stocks that investors have posited for months seems be taking hold, Abbasi said, pointing to recent gains in the SPDR S&P Regional Banking ETF
“We’re seeing some of those high-flying tech names struggle,” Abbasi said. “We’re getting that risk-on move from sectors that have been ignored all year, the sectors that haven’t been loved.”
MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 0.12%, while the pan-European STOXX 600 index <.STOXX> lost 0.37%. MSCI’s emerging markets index <.MSCIEF> was off a scant 0.03%.
On Wall Street, the Dow Jones Industrial Average <.DJI> rose 5.13 points, or 0.02%, to 27,095.85 and the S&P 500 <.SPX> gained 3.82 points, or 0.13%, to 3,043.24. But the Nasdaq Composite <.IXIC> dropped 30.59 points, or 0.37%, to 8,295.40.
Oil pared losses amid rising U.S. equities and hopes of easing U.S.-China trade tensions.
Britain’s FTSE 100 <.FTSE> fell 0.34% as uncertainty over a looming general election compounded a 4.0% drop in shares of BP
The losses in Europe followed a mixed performance in Asia, where Japan’s Nikkei <.N225> rose 0.4% to reach levels last seen a year ago. Shanghai blue chips <.CSI300> dithered either side of flat.
Benchmark 10-year U.S. notes
(Reporting by Herbert Lash; Editing by Bernadette Baum)