By IFCMarkets
SP 500, Dow and Nasdaq rally on higher ISM manufacturing inedx and construction spending
US stock indices closed at record highs on Monday with expectations of strong third quarter results and tax reform boosting investor risk appetite. The dollar resumed strengthening: 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, rose 0.6% to 93.048. S&P 500 closed 0.4% higher settling at fresh record 2529.12, led by health care and financial stocks. The Dow Jones industrial average rallied 0.7% to record high 22557.60 supported by gains in 3M and Goldman Sachs shares. The Nasdaq composite index added 0.3% to all time high 6516.72.
Positive manufacturing data supported market sentiment: the ISM manufacturing index advanced two points from 58.8 in August to 60.8 in September, the highest reading since 2004. A reading of 50 indicates expansion in manufacturing services activities. Construction spending also rose. Treasury yields inched higher despite dovish comments by Fed officials. Minneapolis Fed President Neel Kashkari, who isn’t a voting member of the Fed’s policy-setting committee this year, said the central bank should not raise rates until inflation hits the 2% target. And Dallas Fed President Rob Kaplan, a voting member of the Fed policy committee, said the Fed should be “patient” with monetary policy until a rise in inflation.
Weak euro supports European indices
European stocks ended higher on Monday supported by a weaker euro after independence referendum in Catalonia in Spain. The euroand British Pound extended losses against the dollar. The Stoxx Europe 600 index rose 0.5%, the eight gain in a row. The DAX 30 ended 0.6% higher at record high 12902.65. France’s CAC 40 rose 0.4%. UK’s FTSE 100 outperformed gaining 0.9% to 7438.84. Indices opened 0.1%-0.3% higher today.
Euro fell on prospect of European Union political instability after more than 800 people were injured in clashes with police in independence referendum in Spain’s Catalonia. The referendum had previously been declared illegal by the central government in Madrid. The independence referendum may result in a secession of Spain’s wealthiest region. Pound declined against the dollar after data showed growth in UK’s manufacturing sector slowed in September: manufacturing PMI declined to 55.9 from 56.7 in August. And euro-zone’s manufacturing PMI for September was downgraded to 58.1 from flash reading of 58.2.
Asian markets follow Wall Street’s lead
Asian stock indices are mostly higher today following Wall Street rally overnight. Nikkei closed 1.1% to two-year high 20614.07 as yen continued slide against the dollar. China’s and South Korea’s markets are closed for holidays. Hong Kong’s Hang Seng Index is up 2% after markets opened following a public holiday on Monday and China’s central bank cut reserve ratios over the weekend to encourage lending. Australia’s All Ordinaries Index is down 0.5% as the Reserve Bank of Australia kept interest rates at a record low 1.5%, stating a stronger local currency would slow the economy. Australian dollar accelerated decline against the greenback.
Oil edges lower
Oil futures prices are inching lower today on continued global glut concerns. Iraq said on Monday that exports rose slightly in September from its southern oilfields. Prices rallied last week after Turkish President Erdogan threatened to cut off the pipeline that carries between 500,000 and 600,000 barrels per day oil exports from Iraq’s Kurdistan region. However Erdogan has not acted on his threat. December Brent crude fell 1.2% settling at $56.12 a barrel on London’s ICE Futures exchange on Monday.
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