U.S. data, hopes over Brexit vote lift shares; dollar eases

NEW YORK (Reuters) – World equity markets broadly rose on Wednesday, lifted by investor optimism that British lawmakers will rule out a no-deal Brexit and fresh U.S. data that highlighted a strong economy with low inflation, an outlook that weakened the dollar.

U.S. producer prices barely edged higher in February to mark the smallest annual increase since June 2017, in the latest sign of benign inflation that supports the Federal Reserve’s wait-and-see approach to future interest rate hikes.

The Commerce Department later reported new orders for key U.S.-made capital goods rose by the most in six months in January and shipments increased.

U.S. stocks advanced broadly, with Boeing gaining for the first time since Sunday’s crash of a 737 MAX 8 jet in Ethiopia, while European shares rose on expectations British lawmakers will vote to reject a disorderly no-deal exit for Britain from the European Union.

Economic data still suggests an ‘OK’ economy but analysts’ estimates of corporate profits are slowing, which is worrisome, said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York.

“Earnings estimate revisions continue to come downward but that does not seem for the moment to be fazing equity investors,” he said. It’s the old mantra: don’t fight the Fed.”

A Fed on hold for hiking rates suggests concern about economic growth, which can be seen in a narrowing yield gap in 10-year and two-year U.S. Treasury debt, Geraghty said.

“An inverted yield curve has historically been an indicator of recession,” he said.

MSCI’s gauge of stocks across the globe gained 0.49 percent while the FTSEurofirst 300 index of leading European shares rose 0.51 percent.

On Wall Street, the Dow Jones Industrial Average rose 155.29 points, or 0.61 percent, to 25,709.95. The S&P 500 gained 21.84 points, or 0.78 percent, to 2,813.36 and the Nasdaq Composite added 64.21 points, or 0.85 percent, to 7,655.24.

The British pound rose ahead of another vote in parliament on a proposal that would rule out a “no deal” exit from the European Union. Sterling rose 0.83 percent to $1.3181 while the dollar softened against the yen and euro.

The dollar index, tracking it against six major peers, fell 0.15 percent and the euro rose 0.15 percent to $1.1303.

The Japanese yen strengthened 0.03 percent versus the greenback at 111.35 per dollar.

U.S. Treasury yields rose after falling the previous session as risk appetite improved and equity markets steadied.

Benchmark 10-year U.S. Treasury notes fell 3/32 in price to yield 2.6141 percent.

“After yesterday’s CPI (consumer price index) data, yields fell. So some of these are just rebound after that,” said Stan Shipley, fixed income strategist, at Evercore ISI in New York.

Oil prices rose more than 1 percent, supported by an unexpected drop in U.S. crude inventory along with a forecast of slower-than-expected supply from the world’s top crude producer.

U.S. crude stocks fell last week as refineries hiked output, the Energy Information Administration said.

U.S. crude rose $1.08 to $57.95 per barrel and Brent added 51 cents to $67.18.