By IFCMarkets
US stock indices closed lower on Monday off session lows as investors’ risk appetite was undermined by growing geopolitical concerns after North Korea tested four ballistic missiles. The dollar strengthened with markets pricing in high likelihood of March rate hike: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, inched 0.3% higher to 101.676. The Dow Jones average slipped 0.2% to 20954.34, closing below 21000, led by Travelers and JP Morgan shares. S&P 500 lost 0.3% settling at 2375.31 with ten of the eleven primary S&P 500 sectors finishing in the red. The Nasdaq composite index closed 0.4% lower at 5849.17.
Treasury yields inched higher on Monday on increasing expectations for a March interest rate hike. Federal Reserve Chair Janet Yellen’s speech last week helped boost significantly rate hike expectations: the probability of a March rate increase rose to 86% from about 30% last week, according to CME Group’s FedWatch tool. Investors are waiting for more details on Trump’s proclaimed stimulus measures such as tax and spending programs which spurred recent market rally. Republicans unveiled their proposed replacement to the Affordable Care Act which will end health insurance mandates and roll back extra healthcare funding for the poor. Investors will focus also on Friday’s jobs report for February which may impact Fed’s rate hike decision at its March policy meeting next week. In economic news factory orders jumped 1.2% in January, reinforcing other economic data showing that the US manufacturing sector is strengthening recently. Today at 14:30 CET Trade Balance for January will be released, the outlook is negative for dollar. And at 21:00 CET January Consumer Credit will be published, the outlook is positive.
European stocks European stocks fell on Monday led by decline in banking stocks prompted by a plunge in Deutsche Bank on its plans for a share sale. Both the euro and British Pound inched lower against the dollar. The Stoxx Europe 600 index fell 0.5%. The DAX 30 lost 0.6% to close at 11958.40. France’s CAC 40 ended 0.5% lower and UK’s FTSE 100 added slid 0.3% settling at 7350.12.
Deutsche Bank shares slumped 7.9% with the bank’s market capitalization suffering roughly $2 billion loss after the bank announced plans for an 8 billion euro ($8.5 billion) share sale in order to strengthen its capital. Previously CEO John Cryan had stated the bank would not need to turn to the markets for more capital. Other bank stocks also fell: the Credit Suisse Group slumped 4.3%, UK’s Royal Bank of Scotland lost 2.6% and Germany’s Commerzbank declined 0.7%. Shares of French auto maker Peugeot gained 2.7% after the announcement it has made a €1.3 billion deal to buy General Motors’ Opel brand in Germany and Vauxhall in the UK. Today at 11:00 CET fourth quarter final GDP for euro-zone will be released, the outlook is neutral for euro.
Asian stocks are mostly up today amid heightened geopolitical tensions following North Korea’s missile tests. Nikkei ended 0.2% lower at 19344.15 despite a weaker yen against the dollar and continued purchases of small cap stocks. Chinese stocks are up as China’s finance minister Xiao Jie said the country will strictly control local government debt quotas and step up checks on illegal debt guarantees. Both the Shanghai Composite Index and Hong Kong’s Hang Seng Index are up 0.3%. Australia’s All Ordinaries Index ended 0.2% higher with the Australian dollar gaining against the dollar following Reserve Bank of Australia decision to leave its interest rate unchanged at 1.5%.
Oil futures prices are steady today after edging higher on Monday as traders considered the impact of expected rise in US shale oil output with major oil producers sticking to their deal to curb output by about 1.2 million barrels per day from January 1. The International Energy Agency (IEA) forecast US shale output to grow at about 1.4 million barrels per day by 2022 even if prices remain around $60 a barrel. Investors are waiting on economic data later in the week for further direction guide, particularly import and export data from China on Wednesday. May Brent crude added 0.2% to $56.01 a barrel on London’s ICE Futures exchange on Monday.
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