(Bloomberg) -- U.S. equities halted a two-day slide while Treasuries rose as investors assessed the likelihood for interest-rate cuts. Oil rallied on escalating Middle East tensions.
The S&P 500 Index reached a five-week high as a surprise increase in U.S. jobless claims supported the idea the Federal Reserve may take a dovish turn. The Stoxx Europe 600 Index had opened in the red following declines across Asia, but reversed course to post a small advance. Plenty of caution remained, however, buoying government bonds and gold.
Oil jumped as much as 4.5%, the most since January, after two tankers were damaged in suspected attacks near the Persian Gulf. The U.S. blamed Iran.
Investors are doing their best to stay upbeat amid the daily drumbeat of headlines pointing at political tensions around the globe. The tanker incident follows other attacks in the region last month, and comes as tensions simmer in Hong Kong following Wednesday's clashes between police and protesters. Meanwhile, the trade dispute between the U.S. and China remains unresolved. The hope for many traders is a newly dovish Fed can help blunt some of these threats.
“The market right now is hyper-focused on what the Fed is going to do,” said Shawn Cruz, manager of trader strategy at TD Ameritrade. “Equity markets are pricing in a cut next week. If we don't get that, you could see us pull back.”
Elsewhere, the Australian dollar declined and the three-year yield dropped below 1% for the first time after the unemployment rate rose more than expected. Emerging-market shares retreated for a second day.
Here are some key events coming up:
- Euro-area finance ministers meet in Luxembourg Thursday. On the agenda: financial penalties for Italy over its debt load, and the euro-area budget.
- China and the U.S. release industrial production and retail sales data Friday.
And these are the main moves in markets:
Stocks
- The S&P 500 Index rose 0.4% at the close of trading in New York.
- The Stoxx Europe 600 Index gained 0.2%.
- The MSCI Emerging Market Index decreased 0.4%.
- The MSCI Asia Pacific Index sank 0.4%.
Currencies
- The Bloomberg Dollar Spot Index was little changed.
- The euro weakened 0.1% to $1.1274.
- The British pound slipped 0.1% to $1.2677.
- The Japanese yen gained 0.1% to 108.36 per dollar.
Bonds
- The yield on 10-year Treasuries fell three basis points to 2.09%.
- Germany's 10-year yield was little changed at -0.24%.
- Britain's 10-year yield fell three basis points to 0.83%.
Commodities
- West Texas Intermediate crude gained 2.2% to $52.25 a barrel.
- Gold increased 0.6% to $1,341.04 an ounce.
--With assistance from Adam Haigh, Sheldon Reback, Samuel Potter and Yakob Peterseil.
To contact the reporter on this story: Vildana Hajric in New York at vhajric1@bloomberg.net
To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh
©2019 Bloomberg L.P.
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