US stocks edge up after Comey statement is released and punters look ahead to UK polls

PUBLISHED : Thursday, 08 June, 2017, 6:13am
UPDATED : Thursday, 08 June, 2017, 6:13am

US stocks closed higher and Treasury yields rose on Wednesday after the release of written testimony from ex-FBI chief James Comey, with investors looking ahead to his US Senate appearance on Thursday, the same day as a British parliamentary vote and a European Central Bank meeting.

A smoothly executed rescue of Spain’s Banco Popular lifted bank stocks in Europe, while oil prices suffered a steep slide after the US government reported an unexpected increase in crude and gasoline inventories.

The Dow Jones Industrial Average rose 37.46 points, or 0.18 per cent, to end at 21,173.69, the S&P 500 gained 3.81 points, or 0.16 per cent, to 2,433.14 and the Nasdaq Composite added 22.32 points, or 0.36 per cent, to 6,297.38.

US crude fell 5.08 per cent to US$45.74 per barrel and Brent was last at US$48.12, down 3.99 per cent on the day.

In a written statement posted on the web on Wednesday, Comey, the former FBI chief fired by President Donald Trump, said Trump asked him to back off from a probe into former national security advisor Michael Flynn and told Comey, “I need loyalty. I expect loyalty.”

Comey is to testify before Senators on Thursday.

Comey says Trump asked him to drop probe of Flynn’s ties to Russians

Treasury prices slid after his comments were released, sending benchmark 30-, 10- and 2-year yields to session highs.

“The market was pricing in a much worse news flow from the Comey testimony than what we saw,” said Bruno Braizinha, interest rates strategist at TD Securities in New York. “But it’s one risk out of the way, and now the market is looking at the ECB meeting and the UK election.”

Comey’s Senate appearance, Britain’s national election and the ECB meeting are what ING currency strategist Viraj Patel said had been dubbed ‘Triple Threat Thursday,’ which he said could be “an event filled day that could send global markets on a bumpy ride.”

The lead of British Prime Minister Theresa May’s Conservative Party over the opposition Labour Party has halved to five percentage points, according to a Kantar poll published on Wednesday.

The euro turned shaky after reports suggested the ECB would lower its inflation targets. It was last down 0.11 per cent to US$1.1260.

“Maybe tomorrow’s ECB meeting sees nothing but platitudes and disappoints a market that is getting ahead of itself,” said Societe Generale analyst Kit Juckes.

“But (for us) that would be a huge euro buying opportunity, because ECB normalisation is coming. And when it does, the euro simply won’t be able to sustain undervalued levels for long.”

In Europe, banking shares closed up 0.87 per cent.

Struggling Banco Popular was absorbed by Spain’s biggest bank Santander for a nominal 1 euro, the first use of a regime to deal with failing banks adopted after the 2008 financial crisis.

The success of the process pushed shares in many major banks higher, supporting a recovery for Madrid’s stock market that lost steam later in the day.

“The market has taken Banco Popular as positive news because essentially this is not a bankruptcy but a sort of rescue, even if its subordinated bondholders have been sharply hit,” said Giuseppe Sersale, a fund manager at Anthilia Capital in Milan.

The pan-European FTSEurofirst 300 index lost 0.08 per cent and MSCI’s gauge of stocks across the globe gained 0.04 per cent.