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Markets retreat on lingering uncertainties - 21.3.2017

Nasdaq edges higher while US broad market falls

US stock indices closed lower on Monday as investors were reluctant to make big bets as they awaited more details on tax reforms and spending projects proclaimed by President Trump. The dollar edged higher: 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 0.04% higher at 100.365. The Dow Jones average slipped less than 0.1% to 20905.86, led by Home Depot and Visa shares down 1.2% respectively. The S&P 500 closed 0.2% lower at 2373.45 with financials leading the decliners and seven of the 11 main sectors finishing in negative territory. The Nasdaq composite index closed less than a point higher at 5901.53.

Treasury yields continued to decline on Monday as markets were disappointed by less hawkish than expected central bank statement after the dot plot indicated policy makers projected just three rate hikes this year, signaling no change in pace of rate hikes after December projections. Markets shrugged off Chicago Federal Reserve president Charles Evans’ comment he would support three rate hikes in total this year if economic improvement persists, and four increases if inflation accelerates above the central bank’s 2% target. Evans is a voting member of Fed’s interest-rate-setting committee. Today at 13:30 CET Q4 Current Account Balance will be released in US. The tentative outlook is negative for the dollar.

 SP 500

European stocks fall on protectionism concerns

European stocks fell on Monday amid increased concerns about possible rise in protectionism as a pledge against protectionism was dropped in the G-20 policy statement over the weekend. The euro and the British Pound fell against the dollar. The Stoxx Europe 600 index fell 0.2%. The DAX 30 underperformed falling 0.4% to close at 12052.90. France’s CAC 40 ended 0.3% lower while UK’s FTSE 100 rose 0.1% settling at 7429.81.

The UK government said British Prime Minister Theresa May will trigger the Article 50 on March 29 to begin the country’s exit out of the European Union, causing Pound’s decline against the dollar in a volatile trade. Political uncertainties were in focus in France also as centrist Emmanuel Macron held a televised debate on Monday. An Ipsos poll on Friday showed far-right candidate Marine Le Pen had 1 percentage point lead over Emmanuel Macron, at 27% to 26%, in first-round voting set for April 23. In economic news German producer prices rose 0.2% in February, the strongest annual rise in over five years. Euro-zone labor costs increased 1.6% in the final three months of last year following 1.4% increase the previous quarter. Today at 10:30 CET February Consumer Price Index and Public Sector Net Borrowing will come out in UK. The tentative outlook is positive for Pound.

Asian markets mixed

Asian stock indices are mixed today as concerns about protectionism linger after G-20 financial leaders dropped a pledge to keep global trade free and open, a move pushed by US Treasury Secretary Steven Mnuchin. Nikkei ended 0.3% lower at 19455.88 despite a weaker yen against the dollar with financial stocks weighing on the index. Chinese stocks are rising despite a warning by the Organization for Economic Co-operation and Development China's economic growth is likely to slow to 6.5% this year and further to 6.3% in 2018, though exports are set to pick up as global demand strengthens. The Shanghai Composite Index is 0.4% higher and Hong Kong’s Hang Seng Index is up 0.6%. Australia’s All Ordinaries Index ended little changed closing 0.02% lower with the Australian dollar falling against the dollar.

Oil prices recover

Oil futures prices are rising today on talk of possible extension beyond June of the agreement between major oil producers to cut output by almost 1.8 million barrels per day (bpd) in January to June period. Prices fell on Monday on concerns rising US shale oil output counteracts the balancing effect of lower output by OPEC and other complying major producers as Baker Hughes data showed the number of active US rigs drilling for oil rose for a ninth straight week in US. May Brent crude lost 0.3% to $51.62 a barrel on London’s ICE Futures exchange on Monday.

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