U.S. Stock Futures Edge Higher, Gold Rallies
August 05 2020 - 9:32AM
Dow Jones News
By Caitlin Ostroff
U.S. stock futures ticked higher Wednesday ahead of fresh data
assessing recovery in the American services sector and job
market.
Futures tied to the S&P 500 gained 0.5%, pointing to a rise
in the benchmark index after the New York opening bell. The
pan-continental Stoxx Europe 600 advanced 0.5%.
Shares in Walt Disney rose 6% in offhours trading after the
media and entertainment company reported strong subscriber growth
for its streaming service. Shares in payments company Square gained
12% in offhours trading after the company beat analysts'
expectations for earnings and revenue.
In premarket trading, shares in CVS Health rose 3.1% after the
pharmacy chain posted a rise in second-quarter profits. Shares in
Regeneron Pharmaceuticals gained 2.5% after it said profit surged
in the second quarter.
Gold gained 1.4% to $2,049.10 a troy ounce, extending a bull run
that has gained momentum during the coronavirus pandemic. This
year's sharp drop in yields on U.S. Treasurys to levels below the
expected pace of inflation is making gold, which doesn't generate
an income, more attractive as a store of value. The precious metal,
viewed as a haven asset, is also drawing investors concerned that
the economic fallout from the pandemic may lead to another rout in
stocks.
"It reminds me of the price rally in 2011 when gold posted its
previous record," said Carsten Fritsch, an analyst at Commerzbank.
He said gold could climb higher given guidance from the Federal
Reserve that central bankers will keep interest rates low. "There's
no hint of higher interest rates in the near future, even if
there's an uptick in economic activity," he said.
Brent crude oil rose 3.3% to $45.89 a barrel, its highest since
Saudi Arabia and Russia started a price and production war in
March. Optimism among investors, falling U.S. inventories and a
weaker dollar have supported oil. The ICE U.S. Dollar Index, which
measures the greenback against a basket of currencies, fell
0.7%.
In bond markets, the yield on the 10-year Treasury ticked up to
0.540%, from 0.514% Tuesday, which was the second-lowest closing
level this year. Government bond yields, which move inversely to
price, have weakened in recent weeks following guidance from major
central banks that interest rates are likely to remain low for an
extended period.
The ADP National Employment Report showed nonfarm private-sector
employment in the U.S. increased by 167,000 jobs in July, smaller
than the 1 million increase economists expected.
Economists have worried that a rise in U.S. coronavirus
infection rates last month could curtail economic recovery as some
regions moved to impose local restrictions to curb the number of
cases. This week, new coronavirus cases have inched lower, lending
to optimism for faster economic recovery.
"What we have had so far is where economic activity and
infection rates have been decoupled," said Altaf Kassam, head of
investment strategy for State Street Global Advisors in Europe.
"Going forward, we are going to have them much more coupled
together. Economic activity and infection rates are going to be
much more closely linked."
Data company IHS Markit is also scheduled to release figures
showing activity in the services sector for July at 9:45 a.m., and
the Institute for Supply Management will release a measure of
activity in the U.S. nonmanufacturing sector at 10 a.m.
Investors are also watching negotiations between White House
officials and Democrats over a new coronavirus-relief package.
While the two have yet to bridge differences in unemployment
payments and other aid proposals, Treasury Secretary Steven Mnuchin
said they aim to reach a deal by the end of the week, with
lawmakers voting on the proposal next week.
Deteriorating relations between Beijing and Washington are also
on the radar for markets, and are likely to weigh on investors'
sentiment.
The U.S. and China have agreed to high-level talks on Aug. 15 to
assess Beijing's compliance with the bilateral trade agreement
signed early this year, The Wall Street Journal reported late
Tuesday. While that meeting will be closely monitored, Health and
Human Services Secretary Alex Azar's decision to visit Taiwan in
coming days to discuss the pandemic could become another irritant
in the ties with China.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
August 05, 2020 09:17 ET (13:17 GMT)
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