Trump to meet Xi Jinping - 6.4.2017

Federal Reserve plans reducing balance sheet later this year

US stock indices retreated on Wednesday after release of hawkish March Fed meeting minutes. The dollar strengthened as minutes revealed Federal Reserve plans to reduce its $4.5 trillion balance sheet later this year: 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, closed up 0.02% at 100.516. The S&P 500 lost 0.3% settling at 2352.92 led by financial and telecom stocks, with nine of the eleven primary sectors finishing in the red. The Dow Jones industrial average fell 0.2% to 20648.15 weighed by losses in JP Morgan and Cisco shares. The Nasdaq index dropped 0.6% closing at 5864.48.

Central bank officials’ comments were deemed hawkish as several policy makers expressed confidence in the continued strengthening of inflation and labor market, and minutes confirmed they still expect rates to rise gradually, unless the economy suddenly overheats. Some policy makers also expressed concern equity prices were quite high relative to standard valuation measures. Investors’ risk appetite was further undermined by US House of Representatives Speaker Paul Ryan’s comment there was no consensus on tax reform and it would take longer to accomplish than healthcare reform. The hawkish minutes further boosted the US dollar which got support earlier from the Automated Data Processing Inc. report ahead of official monthly jobs report due Friday the private sector added 263 thousand jobs in March, much higher than the expected 185 thousand addition. On the negative side the expansion in services sector slowed as the Services index from the Institute for Supply Management declined to 55.2 from 57.6 in the previous month. Today at 14:30 CET initial jobless claims and unemployment claims will be released, the tentative outlook is positive. At 16:30 CET natural gas storage change will be released by Energy Information Administration.

Energy shares lead European stocks higher

European stocks inched higher on Wednesday as mining and energy shares led advancers, with losses from auto shares limiting the gains. The euro fell while the British Pound strengthened against the dollar. The Stoxx Europe 600 added less than 0.1%. Germany’s DAX 30 fell 0.5% to 12217.54. France’s CAC 40 lost 0.2% while UK’s FTSE 100 index gained 0.1% to 7331.68.

Markets shrugged off the Markit’s report euro-zone’s final Services PMI came in at 56.4, the highest reading since the second quarter of 2011, lifted by gains in Germany and France. The reading, however, was weaker than the flash estimate of 56.5. Today at 09:00 CET European Central Bank president Draghi speaks in Frankfurt. No important economic data are expected today in euro-zone.

GB 100

Asian investors cautious on uncertain US-China trade prospects

Asian stock indices are mostly lower today as investors refrain from big bets ahead of the summit meeting between US and China presidents Donald Trump and Xi Jinping. Nikkei ended down 1.4% at 18597.06, four month low as dollar inched lower against the yen with uncertainty about US-China trade prospects boosting the appeal of safe haven yen. Chinese stocks are higher marginally after Caixin PMI Services index showed services sector expanded at slower pace in March: The Caixin PMI Services index declined to 52.2 from 52.6 in February. Shanghai Composite Index is 0.3% higher while Hong Kong’s Hang Seng Index is down 0.6%. Australia’s All Ordinaries Index is 0.l% lower despite weaker Australian dollar against the buck.

Oil prices rise following surprise US stock build

Oil futures prices are rising today after the Energy Information Administration reported that US crude inventories rose by 1.57 million barrels to a record 535.5 million barrels last week. At the same time gasoline and distillate inventories fell by 600 thousand and 500 thousand barrels respectively, less than expected.