By Riva Gold
Global stocks were off to a quiet start on Wednesday after the Dow Jones Industrial Average closed above 19000 for the first time in history.
The Stoxx Europe 600 alternated between small gains and losses in morning trading, while futures pointed to a flat open for major U.S. indexes ahead of the U.S. Thanksgiving holiday.
The Dow, S&P 500, Nasdaq and Russell 2000 all closed at record highs on Tuesday for a second day in a row, spurred by a recent uptick in corporate earnings, a jump in oil prices and hopes that the election of Donald Trump would lead to higher growth and inflation.
"This is relief," said Shannon Saccocia, head of asset allocation at Boston Private Wealth. "We have positive earnings posted, an energy market which has stabilized, and we'll have fiscal spending that will benefit parts of the market that have lagged," she said.
After a rough start to the year, the S&P 500 financials sector has risen over 13% in the past month, while the industrial sector has added over 8%. Shares of utilities companies have fallen nearly 3% after an earlier outperformance.
In recent months, "there's a big change in market leadership," said Christophe Foliot, head of U.S. and international equities at Edmond de Rothschild Asset Management. He is favoring more domestically-oriented U.S. stocks in his portfolios, which he says are likely to benefit more from tax cuts and a growing U.S. economy.
They're also less likely to suffer than multinationals if the dollar continues to strengthen or if Mr. Trump enacts protectionist policies, he said. "The pace of appreciation of the U.S. dollar over the last two weeks has been pretty quick and pretty sharp," he added.
The WSJ Dollar Index inched up 0.1% on Wednesday after rising for 11 of the last 12 sessions.
In Europe, the Stoxx Europe 600 reversed early gains Wednesday to trade down 0.3%, as continued gains in commodity-sensitive companies such as miners and oil giants were offset by declines in auto makers, banks and insurance companies.
Italian banks were among the worst performers ahead of a coming referendum on constitutional reform, with shares of UniCredit down over 4% and Banco Popolare di Milano off 3.8%.
The FTSE Italy Banks Index has fallen more than 9% in the last seven sessions amid concerns about the potential for political instability, while the spread between Italian and German 10-year government bonds widened to around 1.87 percentage points on Wednesday.
For European equities to pick up, "you need foreign investors coming back to Europe and moreclarity on political issues, which can't happen before Dec. 4," said Mr. Foliot.
Earlier, stocks in Australia and South Korea followed Wall Street higher, while bourses in Hong Kong and Shanghai struggled for traction. Markets in Japan were closed for a holiday.
In currencies, the dollar was last flat against the yen and the euro.
The British pound was off 0.3% against the dollar at $1.2383 ahead of the U.K.'s Autumn Statement, where investors are hoping for more clarity on the government's tax and spending plans following the June referendum on European Union membership.
Investors also continued to keep an eye on the oil price ahead of a meeting of the Organization of the Petroleum Exporting Countries next week. Brent crude oil was last up 0.5% at $49.37 a barrel after rising to its highest level in nearly a month on hopes for an agreement to cap production.
Later Wednesday, the Federal Reserve will release minutesfrom its November meeting. Given the shift in financial markets since then, "I can't imagine what they would've said in that pre-election meeting that would be at all relevant at this point," Ms. Saccocia said.
"Comments out of the December meeting will be more interesting," she added.
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(END) Dow Jones Newswires
November 23, 2016 06:33 ET (11:33 GMT)
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