By IFCMarkets
US stock indices closed at new record highs on Wednesday with market sentiment boosted by conciliatory tone of President Trump’s Congress address Tuesday evening. The dollar continued strengthening following New York Fed President William Dudley’s comment the case for a rate hike has become “a lot more compelling” : 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, closed up 0.3% at 101.172. The S&P 500 rose 1.4% settling at record 2395.96 led by financial stocks, up 2.8% with nine of the S&P 500′s 11 primary sectors ending higher. The Dow Jones industrial jumped 1.5% breaching above 21000 mark to close at a record 211150.55 led by JP Morgan and American Express. The Nasdaq index closed up gained 1.4% to a record 5904.03.
Trump said he would initiate new infrastructure spending projects worth around $1 trillion and promised massive tax cuts, though didn’t provide any details for his plans or concrete timelines. The stock market rally fueled by expectations of expansionary fiscal measures proclaimed by Trump since election has driven stock valuations higher making equities quite expensive in terms of high price-to- earnings ratios. It is worth noting that current higher valuations are supported by earnings growth, with investors expecting additional stimulus measures boosting earnings even higher. Recent positive data and hawkish comments by Fed officials have raised also expectations of a rate hike at Fed’s meeting in mid-March: the probability for a March rate hike is 66%, up from 35% on Tuesday, according to CME Group’s FedWatch tool. Data on Wednesday showed the manufacturing index from the Institute for Supply Management rose to 57.7 in February, its highest level in more than two years. The headline inflation rose to the highest level since 2012, raising the likelihood of monetary tightening sooner rather than later. Investors will watch closely Fed chair Janet Yellen’s speech on Friday for more clues on central bank’s rate hike timing. Today at 14:30 CET Initial Jobless Claims and Continuing Claims, will be released in US. The tentative outlook is neutral. And at 16:30 CET Natural Gas Storage Change will be released by the Energy Information Administration.
European stocks closed at highest levels year to date with investor optimism buoyed by President Trump’s plans to propose Congress approve additional $1 trillion spending programs and cut taxes for corporations and middle class Americans. Both the euro and British Pound continued the slide against the dollar. The Stoxx Europe 600 rose 1.5% to highest close since December 2015. Germany’s DAX 30 gained 2% to 112067.19. France’s CAC 40 outperformed jumping 2.1% and UK’s FTSE 100 index rose 1.6% to record high 7382.90.
European stocks were lifted also by weaker currency which boosted earnings prospects of exporters. Good economic data also boosted investor risk appetite: Germany’s inflation hit 2.2% in February, the highest in more than 4 years, and activity in the euro-zone’s manufacturing sector expanded in February though at a slower rate than previously estimated. Today at 10:30 CET February Construction PMI will be published in UK, the outlook is negative for British Pound. At 11:00 CET February consumer price index will be released in euro-zone, the tentative outlook is positive for euro.
Asian stocks are mixed today with investors digesting President Trump’s Congress address the previous day. Nikkei gained 0.9% to 19564.80 today on continued yen weakness against the dollar, with exporters benefitting from lower yen. The Shanghai Composite Index is down 0.5% on expectations of tighter credit as China’s newly appointed banking regulator vowed today to strengthen supervision of the lending sector and Hong Kong’s Hang Seng Index is 0.2% lower. Australia’s All Ordinaries Index is up 1.2% with the Australian dollar pulling back against the dollar.
Oil futures prices are inching higher today after official data showed US crude stockpiles rose by 1.5 million barrels last week, less than expected. A strong rebound in US refining activity resulted in lower than expected build, however inventories reached a record 520.2 million barrels after eight straight weekly builds. Gasoline supplies declined by 500000 barrels. May Brent crude fell 0.3% to $56.36 a barrel on Wednesday on London’s ICE Futures exchange.
Market Analysis provided by IFCMarkets
Free Reports:
Note:
This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.