Stocks Advance With Dollar as Haven Demand Eases

• Stocks Advance With Dollar as Haven Demand Eases

Markets struck a note of cautious optimism on Wednesday, with U.S. and European equities rebounding and haven assets declining. The pound extended its gain following the surprise election announcement.

Banks led gains in the S&P 500 Index and lifted the Stoxx Europe 600 Index after its biggest loss since November. IBM Corp. tumbled after sales miss estimates. Treasuries slumped as the 10-year yield moved above 2.20 percent. Sterling edged higher after hitting the strongest level since October. Oil fluctuated before key data and the dollar strengthened.

Investors seem to be taking the addition of yet another macro risk in stride as the U.K. vote joins a slew of elections to be held this year against a backdrop of rising populism in Europe. Geopolitical tensions continue to simmer over both North Korea and Syria, overshadowing signs that the pace of monetary tightening in the world’s biggest economy looks uncertain.

“We’re still hugely vulnerable to political risks,” said Christopher Jeffery, asset allocation strategist at Legal & General Investment Management in London. “Polling for the first round of the French election is hugely tight. We have no clear indication of how the drama in North Korea will play out. And those factors are more important to us than the ebb and flow of earnings news in the short term.”

Here’s what investors are watching:

• The Fed’s Beige Book release on Wednesday will be keenly eyed for clues as to what’s driven the recent cooling of U.S. economic activity.
• The first round of voting in the French election is on Sunday and the two leading candidates will run off in a winner-takes-all contest on May 7.
• U.S. oil inventories fell 840,000 barrels last week, according to the API. More official EIA data due today may show a larger drop of 1.4 million barrels.