Global equities slip - 31.5.2017

SP 500 and Nasdaq snap seven week win streak

US markets ended lower on Tuesday halting a seven session streak of advances. The dollar slipped as euro rebounded: 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, ended 0.12% lower at 97.422. Dow Jones industrial average lost 0.2% to 21029.47. The S&P 500 retreated 0.1% settling at 2412.91 led by energy stocks, down 1.3%. The Nasdaq index slipped 0.1% to 6203.19.

The broad market retreated while several technology stocks including Alphabet and Microsoft closed at record highs. Treasury yields declined yesterday despite mostly positive economic news. Consumer spending and personal income rose 0.4% in April, in line with expectations. The rise in core personal consumption expenditures was 0.2% on month, better than a 0.1% expected gain. Home price gains accelerated in March to the highest rate in nearly three years. However consumer confidence by Conference Board slipped for a second consecutive month in May, though is still near multiyear highs. Dallas Fed President Robert Kaplan, a voting member of Federal Reserve’s interest rate setting committee, said that “some correction” in the stock market could be healthy for sustaining the economic expansion. And Fed Governor Lael Brainard indicated the possibility of a rate hike “soon” as the economy is strong. Today at 13:00 CET Mortgage Applications will be released in America. At 14:00 CET Dallas Fed President Robert Kaplan will speak in New York. At 15:45 CET March Chicago Purchasing Manager’s Index will be published, the outlook is negative. At 16:00 CET April pending home sales will be released, the tentative outlook is positive. And at 20:00 CET Fed will release its Beige Book.

GB 100

Political uncertainty weighs on European stocks

European stock indices extended losses on Tuesday as a potential early election in Italy raised concerns about a possible vote to leave the euro-zone. The euro rebounded against the dollar nevertheless while the British Pound weakened. The Stoxx Europe 600 lost 0.2%. Germany’s DAX 30 fell 0.2% closing at 12598.68. France’s CAC 40 fell 0.5% and UK’s FTSE 100 ended 0.3% lower at 7526.51.

Bank stocks led the losses for the second day after Deutche Bank lowered banks to underweight citing the negative impact of expected slowdown in euro-zone growth on the sector. Matteo Renzi, the leader of Italy’s ruling center-left Democratic part, said it would make sense to hold election in September when a German election is planned and not after German vote. He said this would reduce uncertainty about Italy’s continued membership in euro-zone after German election vote. In economic news France’s economic growth was revised upward to 0.4% in the first quarter from a previous estimate of 0.3%. The 0.2% drop in German consumer price index was bigger than an 0.1% expected decline. And economic confidence slipped in May to 109.2 in euro-zone. German statistics department Destatis reported today retail sales for April fell unexpectedly 0.2% on month instead of an 0.4% expected growth. At 11:00 CET today final May euro-zone inflation data will come out, the outlook is negative for euro.

China's manufacturing sector grows at a steady pace

Asian stock indices are mixed today as investors are cautious given political uncertainties in Italy and UK ahead of June election. Nikkei slipped 0.1% to 19650.57 as strong yen weighed on exporter stocks. Chinese stocks are up as data showed China's factory activity grew at a steady pace in May allaying concerns about a slowdown in the world's second-biggest economy. Growth in China's steel industry rebounded to the strongest level in a year, supported by an increase in new orders, according to an industry survey. The Shanghai Composite Index is up 0.2% while the Hong Kong’s Hang Seng Index is down 0.1%. Australia’s All Ordinaries Index added 0.1% as Australian dollar eased against the greenback.

Oil down on rising global output

Oil futures prices are edging lower today as rising Libyan oil output intensifies concerns about continued global oversupply. Libya's oil production is expected to rise to 800,000 barrels per day (bpd) this week, state-run National Oil Corporation said on Monday. Libya is an Organization of the Petroleum Exporting Countries member, but it was exempt from output cuts which started since January as agreed by major producers. July Brent crude closed 0.86% lower at $51.84 a barrel on London’s ICE Futures exchange on Tuesday.