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Bourses regain poise as resources shares rise

Tuesday 08:45 GMT

What you need to know
● Markets recovering their poise after “Trump trade” wobble
● S&P 500 futures higher and helping European to open on the front foot
● Energy stocks underpinning bourses as oil prices gain ground
● Dollar steadies after sliding to four-month lows, Treasury yields nudge up
● Gold prices ease back as haven flows dwindle
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Hot topic

Investors are rediscovering their risk appetite as worries fade that President Donald Trump’s failure to overhaul US healthcare could compromise his administration’s ability to pass other proposed market-bullish reforms, such as tax reform and winding back financial regulation.

Fears Mr Trump’s agenda could be hobbled pushed the S&P 500 on Monday to a six-week low, forced the dollar index to its weakest in four months and encouraged traders to buy perceived havens, such as Treasuries, gold and the Japanese yen.

The Dow Jones Industrial Average, the price-weighted measure of 30 US blue chips, which hit a record at the start of the month having jumped 15 per cent since Mr Trump’s election, fell for an eight consecutive day, recording its longest losing streak since 2011.

But Wall Street stocks finished the previous session well off their lows, while the greenback pared its losses, as those investors who had been waiting for a pullback in equities took the opportunity to build long positions.

The rebound found fuel from hopes that the healthcare setback may encourage Mr Trump to adopt a more collegiate approach to securing his objectives, heightening the chances of success, according to some Washington watchers.

Equities

US index futures suggest the S&P 500, which at one stage on Monday fell to 2,322, some 3 per cent below the March 1 record high, will add 4 points to 2,345.6.

Wall Street’s recovery from its recent trough is helping underpin other bourses, with a rally for commodity prices lifting resources stocks.

The pan-European Stoxx 600 is up 0.4 per cent as the mining index gains 1.2 per cent.

In Asia, Australia’s commodity sensitive S&P/ASX 200 and Japan’s Topix both rose 1.3 per cent, while Hong Kong’s Hang Seng climbed 0.4 per cent.

Mainland China’s Shanghai Composite was an outlier, shedding 0.4 per cent as traders became wary about tightening liquidity after the central bank held back from injecting funds into the banking system for the third session in a row, according to Reuters.

Forex

The greenback is striving to recover after its recent battering, with the dollar index (DXY), which measures the buck against a basket of its peers, up 0.1 per cent to 99.26.

The DXY touched a 14-year high of 103.82 at the start of the year as the “Trump trade” raged, but at one point on Monday hit 98.86, its weakest since mid November.

The Japanese yen, which started the week by nearly breaching ¥110, its strongest level in four months amid a rush for supposed haven assets, is steady at ‎¥110.64.

The euro is 0.1 per cent softer at $1.0852 but the British pound is 0.2 per cent higher $1.2574 ahead of the UK on Wednesday invoking Article 50 to give formal notice of its intention to leave the EU.

Standout mover in forex is the South African rand, down 1.7 per cent to 12.9667 per dollar on reports that president Jacob Zuma is planning to fire finance minister Pravin Gordhan.

Fixed income

The more positive tone across markets is helping curtail demand for sovereign debt, pushing yields higher.

The 10-year US Treasury yield is up one basis point to 2.38 per cent as the more monetary-policy sensitive 2-year note is adding 1bp to 1.27 per cent.

Ten-year German Bunds are up a fraction of a basis point to 0.41 per cent and UK gilts are gaining 1bp to 1.18 per cent.

Commodities

Recovering risk appetite is bolstering the resources sector, with London-listed base metals holding much of Monday’s late rebound and Chinese iron ore futures steadier after five straight days of decline.

Oil prices are firmer, with Brent crude, the international benchmark, up 0.5 per cent to $50.98 a barrel and West Texas Intermediate, the main US contract, rising 0.7 per cent to $48.05.

Gold is down 0.1 per cent at $1,253 an ounce, after bouncing 0.9 per cent on Monday in its biggest one-day gain in almost a fortnight.

Additional reporting by Peter Wells in Hong Kong

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