By IFCMarkets
US stocks ended little changed on Wednesday after the Federal Open Market Committee minutes showed most policy makers were ready to hike interest rates in June if economic growth accelerates in the second quarter and inflation rises with continued improvement in labor market. The dollar strengthened as investors revised upward their expectations of a rate hike in June. After the minutes were released fed fund futures traders upgraded the probability of a rate hike to 34% from 15% percent on Tuesday, according to the CME FedWatch tool. The live dollar index data indicate the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, advanced 0.6% to 95.166. The Dow Jones Industrial Average slipped 0.02% to 17526.62. The S&P 500 closed 0.02% higher at 2047.63. Losses in utilities and telecommunication stocks of 1.9% and 1.5% respectively were offset by gains in financial stocks. JP Morgan and Goldman Sachs closed up 3.9% and 3.4% respectively with financial stocks gaining 1.9% as banks are expected to earn more by charging higher interest rates after the central bank hikes the rates. The Nasdaq Composite Index added 0.5%. The trading volume was about 8 billion shares on US exchanges, almost 10% above the daily average for the past 20 trading days. Today at 14:30 CET Initial Jobless Claims and Continuing Claims will be released in US. At the same time May Philadelphia Fed Manufacturing Index will be published. The tentative outlook is positive. At 16:00 CET April Consumer Board Leading Indicators will be published. The tentative outlook is positive. And at 16:30 CET Natural Gas Storage Change will be released by the Energy Information Agency.
European stocks advanced on Wednesday with gains in banking stocks offsetting losses in miners. The euro weakened after the final reading of April inflation in euro-zone showed an expected 0.2% drop year on year, raising expectations for additional easing by European Central Bank to fight deflationary pressures. Mining shares fell with stronger dollar weighing on dollar denominated commodities: Anglo American tumbled 3.6%, Antofagasta dropped 2.9%. The Stoxx Europe 600 closed up 0.9% helped also by a 6% jump in food wholesaler Booker Group after Goldman Sachs raised its rating to buy from neutral. German DAX 30 stock index rose 0.5% to 9943.23. France’s CAC 40 added 0.5% and UK’s FTSE 100 closed down less than 0.1%. Today at 11:00 CET March Construction Output will be released in euro-zone. And at 13:30 CET European Central Bank April meeting account will be released.
Asian stocks are retreating today as the possibility of a US rate hike weighs on the outlook for emerging markets which will have to pay higher interest costs taking into account rising levels of financial leverage in these economies. The Shanghai Composite Index is down 0.01% and Hong Kong’s Hang Seng Index is lower 0.6%. Nikkei managed to end 0.01% higher at 16646.66 today in a choppy session even as the initial dollar gains against the yen were pared. Investors refrained from making big bets ahead of Group of Seven meetings this week in Japan.
Oil futures prices are extending losses today after closing lower on Wednesday. July Brent crude fell 1.4% to $48.20 a barrel on London’s ICE Futures exchange yesterday as traders digested the surprise 1.3 million barrels rise to 541.3 million barrels in US crude stockpiles and implications of stronger dollar following the release of hawkish Fed minutes. The inventory build came despite another fall in US crude oil production to 8.79 million barrels per day (bpd), down from a peak of over 9.6 million bpd last year.
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