Equities rally on investor optimism

US stocks closed at fresh record highs on Tuesday as investor confidence was boosted by rising oil prices and better than expected earnings from Alcoa. The dollar weakened as the euro and British Pound rose: the live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, slipped 0.04% to 96.473. The Dow Jones industrial average rose 0.7% to 18347.67, a record high, led by Goldman Sachs and DuPont. The blue chip index joined the S&P 500 at an all-time closing high a day after the broad market index set an all-time closing high. The S&P 500 added 0.7% closing at 2152.14, a fresh record high, led by 2.3% gain in energy stocks. The Nasdaq index closed 0.7% higher at 5022.82, the first close in positive territory in 2016 with a 0.3% gain. The benchmark 10-year Treasury yield rose 7.8 basis points to 1.512%. Market sentiment was buoyed as better than expected quarterly report from Alcoa underpinned expectations corporate earnings may not be as disappointing as anticipated. Risk appetite was bolstered also by optimism the US economic recovery continues after stronger than expected jobs report on Friday. Analysts also note that stocks look attractive given global low interest rate environment but stock valuations are high and a recovery in corporate revenue and earnings growth is needed for a sustainable rally. In economic data a June reading of small business optimism rose for a third straight month but was below its long-term average. And US wholesale inventories edged higher in May. Today at 13:00 CET Mortgage Applications will be released in US. At 14:30 CET June Import Price Index will be published. The tentative outlook is negative for the dollar. At 16:30 CET US Crude Oil Inventories will be released by the Energy Information Agency. And at 20:00 CET June Budget Statement and Federal Reserve Beige Book will be released.

European stocks rose for the fourth straight session on Tuesday led by automaker and bank stocks. The euro and British Pound strengthened against the dollar helped by news that Britain’s interior minister Theresa May will succeed David Cameron as prime minister of the UK. The Stoxx Europe 600 index rose 1.1%. Germany’s DAX 30 gained 1.3% settling at 9964.07 helped also by 4.4% jump in carmaker Daimler shares after second quarter results beat expectations. France’s CAC 40 ended 1.57% higher. UK’s FTSE 100 slipped 0.03% to 6,680.69. Italian bank stocks rose sharply on expectations that Italy would secure a deal at Eurogroup meetings to provide financial aid to its banks which are struggling with bad debts. Today at 11:00 CET May Industrial Production will be released in euro-zone. The tentative outlook is negative.

Asian stocks are advancing today with Hong Kong’s Hang Seng Index up 0.5% with Shanghai Composite Index 0.3% higher, and Australia’s S&P ASX 200 up 0.7% . Nikkei ended 0.8% higher today as yen slipped to a three-week low of almost 105 to the dollar on expectations of more Bank of Japan easing after Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending following an election victory on Sunday. However Japan's top government spokesman said today the government was not planning central bank direct purchases of government bonds to finance government spending or tax cuts.

Today at 16:00 CET the Bank of Canada will announce the interest rate decision and the monthly policy report will be published. The central bank is expected to leave the interest rate unchanged.

Oil futures prices are edging lower today as investors took profits following previous day’s jump in prices and the American Petroleum Institute report late Tuesday indicated a surprise 2.2 million barrels rise in US crude inventories last week to 523.1 million barrels instead of an expected fall. September Brent crude gained 4.8% to $48.47 a barrel on the ICE Futures exchange in London on Tuesday on Organization of the Petroleum Exporting Countries estimate the demand for OPEC-pumped crude will rise to 33 million barrels a day in 2017, above the average 31.9 million barrels a day demand for OPEC oil in 2016.