US equities

U.S. equity indices reach record highs as manufacturing figures beat forecast, U.S. dollar rises, gold slips

Jan 4 • Morning Roll Call • 239 Views • No Comments

All three major USA market indices reached record highs during Wednesday’s New York trading session; the DJIA, SPX and the NASDAQ rose as a consequence of positive, high impact, fundamental economic releases, that mostly beat forecasts. The ISM manufacturing index for the USA came in at 59.7 for December, construction spending rose by 0.8% in November to a record annual high, whilst new orders recorded a 69.4 reading for December. This positive news extended beyond impacting equity values, the news also caused the U.S. dollar to rise versus its three main peers; yen, euro and sterling.

On Wednesday evening The Fed released the minutes from their December FOMC rate setting meeting and the release contained few surprises. The committee voiced their concerns on inflation being below the 2% target, whilst suggesting that the tax cuts, which will cut the corporate tax rate from 35% to 21%, may have a healthy trickle down effect on consumers’ spending ability, thereby increasing inflation. The committee appeared unified on the pace of the intended interest rate rises in 2018, appearing to suggest a pattern of raising from perhaps March onwards, whilst reserving the capacity to stall further rate rises, if the economy/markets react badly.

WTI oil rose during Wednesday’s sessions, breaching the $61 per barrel for the first time since May 2015. Gold gave up some of its recent gains, falling to $1317 per ounce as its safe haven appeal reduced, closing the day out down circa 0.1% on the day.

European equities rallied on Wednesday, as investors’ sentiment improved and they ignored a cluster of politic issues, such as; the upcoming Italian election, Germany’s impasse on a potential new coalition government, Catalonia and Brexit. the euro fell versus the U.S. dollar, but rose versus sterling and the Swiss franc. The franc fell versus the majority of its peers despite an extremely high Swiss manufacturing PMI; beating forecast by coming in at 65.2 for December, sight deposit levels slipped in Swiss banks and the safe haven appeal of CHF diminished, as the USA equity markets and U.S. dollar rose.

Sterling fell versus its main peers on Wednesday, with analysts and traders suggesting that they had few reasons to bid up the pound further, until the U.K. delivers positive news on a potential Brexit trade agreement. The U.K. construction PMI for December missed forecast, but the ONS (the U.K.’s official statistics agency), improved their estimate for annual U.K. GDP, up from 1.5% to 1.7%. Sterling increased by circa 10% in 2017, the largest gains seen since 2009, but despite rising to a high not seen since September early in the trading sessions, after breaking the critical 1.3600 handle on Tuesday, GBP/USD fell by circa 0.7% on the day.

U.S.DOLLAR.

USD/JPY traded in a very tight range with a bias to the upside during Wednesday’s sessions, closing out the day up circa 0.1% at 112.5, just above the daily PP, having rejected the 100 DMA sited at 112.06. USD/CHF ended the day at 0.977, up 0.6% on the day, close to the 100 DMA positioned at 0.978. At one point during the day the major currency pair breached R3, rising to 0.979, up over 1% before retracing. Despite rising by circa 0.2% to 1.254, USD/CAD maintained its position below the 100 DMA, which is currently sited at 1.258.

EURO.

EUR/USD traded in a tight range, and fell by circa 0.3% on the day to 1.201, breaching S1. EUR/GPB traded in a tight range with an eventual bias to the upside, initially falling to S1 before recovering to end the day up circa 0.2% at 0.888. EUR/CHF rose by circa 0.4% on the day, retracing from a high of 1.762, after breaking up through R2, to end the day at circa 1.174.

STERLING.

GBP/USD fell by (at one stage) 0.7% during the day, closing out at approx. 1.351, close to S2, and eventually down circa 0.6% on the day. The U.K. pound fell by circa 0.4% versus both Australasian dollars and by circa 0.3% versus yen.

GOLD.

XAU/USD slipped from its recent high of 1321, to post a low of 1307, after falling through S1, before recovering the majority of losses to close out the day at circa 1317, down approx. 0.1% on the day, still significantly above the 100 and 200 DMAs and crucially maintaining its position above the critical handle (round number) of $1,300 per ounce.

EQUITY MARKETS SNAPSHOT FOR JANUARY 3rd.

• DJIA closed up 0.42%.
• SPX closed up 0.83%.
• NASDAQ closed up 1.5%.
• FTSE 100 closed down 0.08%.
• DAX closed up 0.47%.
• CAC closed up 0.26%.

KEY ECONOMIC CALENDAR EVENTS FOR JANUARY 4th.

• GBP. Nationwide House Px n.s.a. (YoY) (DEC).

• GBP. Net Consumer Credit (NOV).

• GBP. Mortgage Approvals (NOV).

• GBP. Markit/CIPS UK Services PMI (DEC).

• USD. ADP Employment Change (DEC).

• USD. ADP Employment Change (DEC).

• USD. DOE U.S. Crude Oil Inventories (DEC 29).

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