Article Highlights

  • Wall Street, bond yields rise after ex-FBI chief's written testimony
  • European bank shares rise after Santander rescues rival Popular
  • All eyes on "Triple Threat Thursday"
  • Oil falls to one-month low after supply data
  • Euro hit by report ECB may cut inflation outlook
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U.S. stocks closed higher and Treasury yields rose on Wednesday after the release of written testimony from ex-FBI chief James Comey, with investors looking ahead to his U.S. Senate appearance on Thursday, the same day as a British parliamentary vote and a European Central Bank meeting.

A smoothly executed rescue of Spain’s Banco Popular lifted bank stocks in Europe, while oil prices suffered a steep slide after the U.S. government reported an unexpected increase in crude and gasoline inventories.

U.S. crude fell 5.08 percent to $45.74 per barrel and Brent was last at $48.12, down 3.99 percent on the day.

The Dow Jones Industrial Average rose 37.46 points, or 0.18 percent, to end at 21,173.69, the S&P 500 gained 3.81 points, or 0.16 percent, to 2,433.14 and the Nasdaq Composite added 22.32 points, or 0.36 percent, to 6,297.38.

In a written statement posted on the web on Wednesday, Comey, the former FBI chief fired by President Donald Trump, said Trump asked him to back off from a probe into former national security advisor Michael Flynn and told Comey, “I need loyalty. I expect loyalty.”

Comey is to testify before Senators on Thursday.

Treasury prices slid after his comments were released, sending benchmark 30-, 10- and 2-year yields to session highs.

“The market was pricing in a much worse news flow from the Comey testimony than what we saw,” said Bruno Braizinha, interest rates strategist at TD Securities in New York.

“But it’s one risk out of the way, and now the market is looking at the ECB meeting and the UK election,” he added.

Comey’s Senate appearance, Britain’s national election, and the ECB meeting are what ING currency strategist Viraj Patel said had been dubbed ‘Triple Threat Thursday,’ which he said could be “an event-filled day that could send global markets on a bumpy ride.”

The lead of British Prime Minister Theresa May’s Conservative Party over the opposition Labour Party has halved to five percentage points, according to a Kantar poll published on Wednesday.

The euro turned shaky after reports suggested the ECB would lower its inflation targets. It was last down 0.11 percent to $1.1260.

“Maybe tomorrow’s ECB meeting sees nothing but platitudes and disappoints a market that is getting ahead of itself,” said Societe Generale analyst Kit Juckes.

“But (for us) that would be a huge euro buying opportunity because ECB normalization is coming. And when it does, the euro simply won’t be able to sustain undervalued levels for long.”

In Europe, banking shares closed up 0.87 percent.

Struggling Banco Popular was absorbed by Spain’s biggest bank Santander for a nominal 1 euro, the first use of a regime to deal with failing banks adopted after the 2008 financial crisis.

The success of the process pushed shares in many major banks higher, supporting a recovery for Madrid’s stock market that lost steam later in the day.

“The market has taken Banco Popular as positive news because essentially this is not a bankruptcy but a sort of rescue, even if its subordinated bondholders have been sharply hit,” said Giuseppe Sersale, a fund manager at Anthilia Capital in Milan.

The pan-European FTSEurofirst 300 index lost 0.08 percent and MSCI’s gauge of stocks across the globe gained 0.04 percent.

(Additional reporting by Patrick Graham and Danilo Masoni in London and Richard Leong, Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed in New York; Editing by Nick Zieminski and James Dalgleish)