Wall Street ends sharply higher, dollar plunges in UK reversal, strong earnings

  • US and European stock indices rise
  • Bank of America earnings beat fuels rally
  • The pound sterling and the euro appreciate against the dollar
  • Benchmark Treasury Yields Rise for 3rd Straight Year

NEW YORK, Oct 17 (Reuters) – Wall Street posted solid gains on Monday as strong earnings and a reversal in financial policy in Britain fueled risk appetite and boosted the pound and euro against to the greenback.

All three major US equity indices rallied to end the session up 1.9% to 3.4% as the dollar lost ground against a basket of global currencies.

“The catalysts that have been unleashed in the markets since the start of the year are well known,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Now investors are looking for green shoots of catalysts that can start to deliver some improvement.”

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Stocks were poised for a strong open after Britain’s new finance minister, Jeremy Hunt, scrapped tax cuts proposed by Prime Minister Liz Truss and limited its energy subsidies, while Bank of America Corp (BAC.N ) released third-quarter results that beat the consensus, after benefiting from a series of interest rate hikes by the Federal Reserve.

The Dow Jones Industrial Average (.DJI) rose 550.99 points, or 1.86%, to 30,185.82, the S&P 500 (.SPX) gained 94.88 points, or 2.65%, to 3,677.95 and the Nasdaq Composite (.IXIC) added 354.41 points, or 3.43%, to 10,675.80.

European stocks closed sharply higher following the reversal in UK financial policy.

The reversal has “lifted some clouds, but it doesn’t lift the political risk,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, who added that the new government formed by British Prime Minister Liz Truss “caused a lot of uncertainty.”

Meanwhile, the loosening yuan weighed on Asian markets.

The pan-European STOXX 600 index (.STOXX) rose 1.83% and the MSCI gauge of stocks across the world (.MIWD00000PUS) gained 2.09%.

Emerging market stocks rose 0.32%. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) closed down 0.19%, while the Japanese Nikkei (.N225) lost 1.16%.

Long-term Treasury yields rose at the end of a choppy session for the bond market, even as investor sentiment eased following the U.K. policy flip-flop.

Benchmark 10-year notes last fell 3/32 to 4.0166%, down from 4.006% on Friday night.

The 30-year bond last fell 23/32 to 4.0214%, down from 3.975% on Friday night.

The euro and pound strengthened following Hunt’s policy announcement, causing the greenback to lose ground against a basket of major global currencies.

The dollar index fell 1.02%, with the euro up 1.19% at $0.9835.

The Japanese yen weakened 0.19% against the greenback at 149.06 to the dollar, while the pound last traded at $1.135, up 1.61% on the daytime.

Crude prices swayed as markets juggled signs of an impending recession and China’s continued accommodative monetary policy.

U.S. crude settled 0.18% to close at $85.46 a barrel, while Brent settled at $91.62 a barrel, essentially flat on the day.

The softness of the greenback gave a boost to gold prices.

Spot gold added 0.4% to $1,648.39 an ounce.

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Reporting by Stephen Culp Additional reporting by Marc Jones in London Editing by Mark Potter, Will Dunham and Nick Zieminski

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