US open: Stocks rally as yuan strengthens, oil recovers

US stocks rallied on Tuesday after China’s central bank set the yuan higher and oil prices rebounded.

At 1447 GMT, the Dow Jones Industrial Average rose 1.13%, the Nasdaq increased 1.55% and the S&P 500 gained 1.16%.

The People’s Bank of China set the mid-point for the yuan at 6.5628 per dollar on Tuesday, just two pips weaker than the previous strong fix and firmer than its spot levels late on Monday. The spot yuan weakened from its overnight close to 6.5733 to the dollar, but offshore it strengthened as much as 180 pips to 6.5660.

“This recovery in the offshore yuan could well be enough to help put a floor under stock markets in the short term, as US markets managed to stabilise yesterday despite posting new multi week lows during the day,” said Michael Hewson, chief market analyst at CMC Markets.

The yuan has depreciated more than 1% since the start of the year, after losing 4.7% against the dollar last year.

Meanwhile oil prices recovered with Brent crude up 1.5% to $32.06 per barrel after reaching a 12-year low and West Texas Intermediate up 0.97% to $31.72 per barrel after falling to its lowest level in over a decade.

“The overwhelming supply and demand equation that has encouraged dramatic selling is going nowhere anytime soon, with a persistent aggressive oversupply in the markets consistently haunting investor attraction, while weaker forecasts around global growth weighs on demand, and it is likely that more global economic downgrades from major institutions are to follow early this year,” said FXTM chief market analyst Jameel Ahmad.

On the economic data front, NFIB’s US Small Business Optimism index rose to 95.2in December from a previous 94.8, beating expectations for a reading of 95.

A report from the Labor Department showed the number of job openings was little changed at 5.4m on the last business day of November. The job openings rate was 3.7%.

The dollar was up against all the main currencies, rising 1.08% against the pound, 0.14% against the euro and 0.04% against the yen. Spot gold was down 0.77% to $1,029.39.

In company news, Alcoa declined after reporting fourth quarter revenue that missed expectations.

Lululemon Athletica surged after it raised its guidance for the fourth quarter, driven by strong holiday sales.

Horizon Pharma jumped after the drugmaker raised its 2016 sales outlook as the group is expected to close the Crealta Holdings acquisition this week.

Coca-Cola advanced after the beverage giant was upgraded to ‘buy’ from ‘hold’ by Stifel on expectations of improved organic growth.