NEW YORK: Wall Street stocks advanced on Tuesday (Wednesday in Manila) with the Nasdaq reaching a new record as lackluster US economic data boosted confidence the Federal Reserve will continue to keep interest rates low.
Equity markets elsewhere were mixed, with Frankfurt and Paris avoiding major swings ahead of a European Central Bank meeting on Thursday. Shares in Tokyo rose, while London declined.
“Now that the summer trading period is behind us following yesterday’s Labor Day vacation in the US, the focus of financial market participants will be very much on the upcoming monetary policy events,” said Derek Halpenny, European head of markets research at the Bank of Tokyo-Mitsubishi UFJ in London.
Activity in the huge US services sector unexpectedly slowed in August but remained in expansion mode, according to the Institute for Supply Management on Tuesday.
The report initially pushed US stocks into the red, but US equities soon rallied as analysts concluded the data reduced the odds the Federal Reserve will boost interest rates at its September 20-21 meeting.
“The headline appears to be ‘bad news is good news’ again as investors are taking weaker-than-expected non-manufacturing data and translating it into ‘lower for longer’ for the Federal Reserve,” said Jack Ablin, chief investment officer at BMO Private Bank.
The Nasdaq gained 0.5 percent to 5,275.91 points, up about 14 points from the last record set August 15. Key gainers included Amazon, Facebook and Tesla Motors.
European shares seemed on hold ahead of Thursday’s ECB meeting. The ECB, comforted by better-than-expected data since Britain’s vote in June to exit the European Union, is likely to keep drastic monetary policy changes in reserve, analysts predicted.
Policymakers stress that many measures announced by the ECB in March – when it lowered interest rates and extended stimulus measures – have yet to take full effect.
London’s benchmark FTSE 100 index closed 0.8 percent lower as the pound advanced to $1.3442, building on Monday’s gains won thanks to easing concerns over Brexit’s economic fallout.
The Nikkei in Japan gained 0.3 percent with financials such as Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial rising after Bank of Japan chief Haruhiko Kuroda acknowledged that the central bank’s negative rate policy was hurting commercial banks’ profits.
$28 bn pipeline merger
In merger news, Spectra Energy jumped 13.4 percent after agreeing to be acquired by Canadian pipeline company Enbridge in an all-stock deal valued at $28 billion. Enbridge rose 3.9 percent.
US truck maker Navistar soared 40.7 percent on news that Volkswagen bought a 16.6 percent stake in the company for $256 million. Volkswagen plans to launch a technology and supply chain venture with the US company. Volkswagen fell 0.1 percent.
Monsanto fell 1.3 percent on news German pharmaceutical group Bayer raised its bid for the US company to almost $66 billion. Monsanto said it was “engaged in constructive negotiations” with Bayer, which dropped 0.4 percent.