Market View

[Samirofi]

Wall Street retreats from record highs, dragged by tech sector

Most U.S. stocks slipped Friday, edging back from record highs, as better-than-estimated results from General Electric Co. failed to offset disappointing losses from the technology sector after Google Inc. and Microsoft Corp failed estimates on earnings.

Gold advanced and the dollar slumped. Oil settled higher after swinging between gains and losses during the trading session.

Microsoft Corp was the biggest drag on the three major indexes, with the Nasdaq showing the steepest declines. Google Inc also dragged on the S&P 500 and Nasdaq as both companies reported earnings that fell short of expectations.

Microsoft slumped 10.9 percent to $31.56, while Google lost 1.1 percent to $901.50. The S&P tech sector led declined, falling 2 percent.

General Electric advanced 4.6 percent to the highest level since 2008 after saying its order backlog reached a record amid demand for jet engines and drilling equipment.

U.S. stocks rallied yesterday, sending the S&P 500 and the Dow Jones Industrial Average to records, as earnings from Morgan Stanley and UnitedHealth Group Inc. beat estimates and jobless-benefit claims declined to a two-month low. The S&P 500 has climbed 0.7 percent in the past five days, for a fourth straight weekly gain. The benchmark gauge for U.S. equities has surged 150 percent from a 12-year low in 2009, driven by profit growth and three rounds of central bank monetary stimulus.

The Standard & Poor’s 500 Index gained 2.72 points or 0.16% to close at 1692.09 levels. The index reached the highest point at 1692.09 and the lowest point at 1684.08. By closing, 306 shares gained while 189 shares declined and 5 shares remained unchanged.

The Dow Jones Industrial Average index lost 4.80 points or 0.03% to close at 15543.74 levels, the index reached the highest point at 15544.55 and the lowest point at 15491.96. By closing, 16 shares increased while 14 shares declined.

The NASDAQ Composite Index dropped 23.66 points or 0.66% to close at 3587.61 levels, the index reached the highest point at 3589.05 and the lowest point at 3578.57. By closing, 1063 shares advanced while 1167 shares declined and 210 shares remained unchanged.

The Dollar Index, which tracks the performance of the U.S. dollar against a basket of other major currencies dropped to 82.68, from an opening at 82.91, after hitting a high of 83.05, and a low of 82.62.

Gold closed at $1295.20, up from an open at $1283.01, after hitting a high of $1297.64, and a low of $1282.35. Crude oil futures climbed to $108.18, from an opening at $108.11, after having hit a high of $109.28 and a low of $107.48.

[Samirofi]

European shares rise on Fed’s renewed pledge to keep rates low

European shares rose for a second straight session on Thursday after the Fed reiterated its pledge to keep interest rates at the current low level for considerable time.

The Fed said in its statement released on Wednesday it would keep interest rates low for a while, but indicated it will raise interest rates fast once it begins it first hike.

Eyes will focus today on Scotland referendum that will decided whether it would remain or split from the 300-year old UK union.

Polling stations opened at 7 a.m. local time and will close at 10 p.m., where the first results will be announced 3 or 4 hours after that. The final result of the referendum will be available at 0400-0500 GMT on Friday.

As of 07:24 EST, STOXX EUROPE 600 soared 0.76% to record 347.00 points. Information Technology led the advance with a rise of 0.94%, followed by Health Care, which recorded 0.93% rise.

The highest shares were for Sulzer AG-REG as it advanced 9.62% to 137.90 CHF, while the biggest drop was recorded by Polymetal Intern as its shares plummeted 3.81% to 482.40 GBP.

Looking at other the major European indices, Germany’s DAX index advanced 0.97% to 9755.35 points, while the French CAC index rose 0.61% to 4458.52 levels. Britain`s FTSE 100 index recorded 0.37% rise to 6805.89 points.

[Samirofi]

Wall Street climbs, S&P 500 nears record peak

European shares rose for a second straight session on Thursday after the Fed reiterated its pledge to keep interest rates at the current low level for considerable time.

The Fed said in its statement released on Wednesday it would keep interest rates low for a while, but indicated it will raise interest rates fast once it begins it first hike.

Eyes will focus today on Scotland referendum that will decided whether it would remain or split from the 300-year old UK union.

Polling stations opened at 7 a.m. local time and will close at 10 p.m., where the first results will be announced 3 or 4 hours after that. The final result of the referendum will be available at 0400-0500 GMT on Friday.

As of 07:24 EST, STOXX EUROPE 600 soared 0.76% to record 347.00 points. Information Technology led the advance with a rise of 0.94%, followed by Health Care, which recorded 0.93% rise.

The highest shares were for Sulzer AG-REG as it advanced 9.62% to 137.90 CHF, while the biggest drop was recorded by Polymetal Intern as its shares plummeted 3.81% to 482.40 GBP.

Looking at other the major European indices, Germany’s DAX index advanced 0.97% to 9755.35 points, while the French CAC index rose 0.61% to 4458.52 levels. Britain`s FTSE 100 index recorded 0.37% rise to 6805.89 points.

-The Dow Jones Industrial Average gained 0.48% or 82.00 points to 17151.00 -The S&P 500 index advanced 0.38% or 7.50 points to 2001.25 -The NASDAQ Composite Index gained 0.51% or 20.75 points to 4086.00 . As of 10:34 a.m. ET


Treasury notes were declining. Yields on the 2-year Treasury bill and the 10-year Treasury note were up 0.8 and 1.3 basis points to 0.577% and 2.633% respectively.

Data released earlier showed U.S. housing starts and permits fell in August, but upward revisions to the prior month`s data suggested the housing market continued to gradually improve.

Separate data showing a sharp drop in the number of Americans filing new claims for jobless benefits last week suggested the slowdown in job growth last month was probably an anomaly.

[Yousuf Ali]

Nikkei

The Japanese equities index extends its upward trajectory and sits at fresh fifteen year highs tracking the overnight gains on Wall Street. Moreover. BOJ’s status quo also kept the gains in the index intact.

The benchmark Nikkei 225 index 1.11% higher at 19460 levels, retreating from fifteen year highs of 19479.89. The index kept gains as expectations that Federal Reserve will raise interest rates sooner than currently anticipated eased on weaker than expected US economic data released overnight. Moreover, muted yen across the board also supported the upside in the index.

The index trades with a positive market breadth, the advance-decline ratio being 149.59.

[Yousuf Ali]

One of the puzzle on December FOMC meeting was the seeming contradiction between virtually unchanged forecasts for growth and inflation in 2017 and the rise in the median projection for rate hikes in 2017 from two to three.
The minutes of the December meeting show that the outcome of the November election led many of the policymakers to change their view about the risks to their forecasts. Most of the risk changes were titled to the upside for growth and away from the downside for inflation. This was enough to cause some committee members to lift their assessment of the appropriate number of rate hikes in 2017.
The minutes also showed that the policymakers stressed the uncertainly about the fiscal outlook, suggesting that there is no intention to hike the federal funds rate in the near-term. We continue to think that the next rate hike will take place in June followed by another in December for a total of 25bps rate hikes in 2017.

[Yousuf Ali]

By proposing protectionist trade policies and shifting the tax burden from exports to imports, the Trump administration and congress are, in effect, trying to kill two birds with one stone.
During the campaign, President-elect Trump repeatedly assailed “bad trade deals” and pointed to large trade deficits with China and Mexico, primarily, but also with Japan and South Korea, as evidence of trade agreements that left the US at a disadvantage.
As shown in figure, these four countries plus the European Union and India account for the US trade deficit in goods and services. China, however, is the main source of the trade deficit, with the US importing about $300bn more than it exported to China in the previous four quarters.
The number of US manufacturing jobs fell precipitously after the US granted most-favored-nation trading status to China. Consistent with Trump’s view of US trade deals, most economies charge higher tariffs on US exports than the US assesses on those economies.
Even with the NAFTA countries, according to data from the WTO, US exports face a higher tariff burden than Canadian or Mexican exports, especially for agricultural goods.

[Yousuf Ali]

It’s quite day on the US data front with only a couple lower-tier releases but much busier on the Fed front. Harker, Evans, Lockhart, Bullard, Kaplan and Yellen are all due to make public remarks
Tough yellen’s will come after the close and is unlikely to offer much guidance on policy given the town hall setting. Turning to the data, we are below the market on import prices a looks for a 0.4% m/m advance in December. We are most upbeat on jobless claims and expect a modest correction to 245k while the market looks for a bounce to 255k.

[Yousuf Ali]

US President has fired acting US Attorney General Sally Yates. Yates voiced dissent to Trump’s immigration decision saying that she was not convinces that the executive order is lawful.
Trump, now appoints Dana Boente as acting AG.

[Yousuf Ali]

This week is less risk heavy. Not many economic data but there are some events scheduled that might trigger volatility in the market.
Central banks:
Reserve Bank of New Zealand (RBNZ) will announce interest rate decision and outlook on Wednesday.
Trump:
Two weeks under the Trump administration have been kind of a roller-coaster ride. There is little evidence of that slowing down. Japanese Prime Minister Shinzo Abe is scheduled to meet Mr. Trump on Friday and they will have plenty to talk about. In recent times, Mr. Trump withdrew from the Trans-Pacific Partnership deal, which was passed by Japanese parliament and criticized Japan of currency manipulation.
Brexit:
UK’s House of Commons will debate the passed Brexit bill for three days and changes can be made and the final bill will be presented for voting in the House of Lords.

[Yousuf Ali]

Headlines: of BOJ deputy governor Nakaso commenting on the bank’s monetary policy stance.

Nations well understand BOJ’s intensions for easing.
BOJ decide operations by looking at market.
Will continue buying sufficient JGBs
Daily bond operations don’t suggest policy stance.
Importance of free trade is a shared understanding amongst G7/G20 nation
Doesn’t think protectionism will spread around the world
BOJ has sufficient tools to control yield curve.
Do not have specific rate range in mind
Current shape fo yield curve is appropriate
If market perception of economy & prices improves
A hike in BOJ’s yield target wont diminish degree of monetary easing.