Stocks Mostly Higher Ahead of Thursday’s ECB Meeting
Global stocks mostly rose Wednesday as investors struck a cautiously optimistic tone ahead of the European Central Bank’s meeting Thursday.
Investors betting on central-bank action have helped push riskier assets such as stocks higher in recent weeks after the U.K.’s surprise vote to leave the European Union in June triggered a market selloff. The ECB is expected to leave its policy unchanged Thursday, but many market participants said they expect bank officials to signal fresh stimulus at its September meeting.
The Dow Jones Industrial Average rose 43 points, or 0.2%, to 18602, after the index climbed to a record close Tuesday in its longest winning streak in three years. The S&P 500 gained 0.4%, and the Nasdaq Composite rose 1.1%.
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The Stoxx Europe 600 gained 1% following a mixed session in Asia.
Wednesday’s moves came as the U.S. dollar hovered around a four-month high following a string of stronger-than-expected U.S. economic data releases. The WSJ dollar index, which measures the dollar against a basket of 16 currencies, was up 0.2% recently.
Investors will continue to focus on the latest corporate earnings Wednesday, while keeping a close eye on the outlook for global central bank policy.
Traders work at their desks at the stock exchange in Frankfurt, Germany, July 19.
Traders work at their desks at the stock exchange in Frankfurt, Germany, July 19. Photo: Reuters
The Brexit vote “will certainly mean central banks will be more accommodative,” said Paul Markham, a portfolio manager at Newton Investment Management.
Central banks’ stimulus measures have encouraged investors to move into riskier assets by lowering returns on safe investments such as government bonds. The yield on the 10-year Treasury note rose to 1.592% Wednesday, according to Tradeweb, compared with 1.558% Tuesday. Yields rise as prices fall.
Despite equity markets reaching record highs, Mr. Markham said stocks still look attractive in this environment when bond yields are so paltry.
“Equities with cash returns attached to them and some chance of growth” still offer investors some value, he added.
The Bank of England kept rates on hold last week, but indicated it is likely to ease policy at its August meeting. The Bank of Japan is due to meet next week amid heightened speculation about fresh rounds of monetary and fiscal easing from Tokyo.
The stronger dollar, meanwhile, partly reflects investors factoring in an increased likelihood of the Federal Reserve raising interest rates this year. Stronger-than-expected U.S. home-building numbers released Tuesday were the latest in a series of solid economic data releases that have increased expectations for Fed action.
The euro was 0.1% lower against the dollar at $1.101 recently, while the dollar was 0.4% higher against the yen at ¥106.66.
Investors are also watching the U.S. corporate earnings season closely. Shares in Morgan Stanley rose 1.4% after it reported earnings and revenues that beat estimates despite registering declines.
American Express and Intel are also due to release results Wednesday.
Lindsey Bell, senior analyst at S&P Global Market Intelligence, noted that nine of the 12 companies to release results Tuesday before the market close beat expectations. Microsoft shares rose 6.9% after reporting better-than-expected results after the closing bell.
Bob Baur, chief global economist at Principal Global Investors, said profits in the U.S. will rebound as year-over-year results comparisons get easier for companies.
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“Profits are already starting to grow again,” said Mr. Baur, adding the recent stock market highs are “not completely unfounded.”
Gains in European stocks were led by the technology sector Wednesday. The technology subindex of the Stoxx Europe 600 is up over 5% this week following Japanese telecommunications conglomerate SoftBank Group’s $32 billion deal to acquire U.K.-based chip maker ARM Holdings.
European mining stocks—the best performing sector so far this year—were under pressure amid weaker commodity prices.
In Asia, Japan’s Nikkei Stock Average fell 0.3% following six consecutive sessions of gains. The Shanghai Composite Index slipped 0.3% after China’s central bank unexpectedly set the yuan slightly stronger against the dollar. Australia’s S&P ASX 200, meanwhile, rose 0.7% and Hong Kong’s Hang Seng Index ended 1% higher.
In commodities, U.S. crude oil rose 0.9% to $45.05 a barrel. Gold prices fell 1.1% to $131 an ounce.
Write to Christopher Whittall at
christopher.whittall@wsj.com