Despite strong bullish economic news; with sales of previously owned U.S.A. homes defying analysts’ expectations by increasing in November to reach the highest level seen since 2007, the major U.S. equity indices failed to reach new record highs in Wednesday’s New York trading session. The rise in sales came as a consequence of buyers “getting ahead of the curve” as borrowing costs are rising. Sales have increased by 18.2 percent from November 2015, with the average sale prices rising by 6.8 percent from November 2015 to 235K.
In Europe the travails of the Italian baking sector and the world’s oldest bank, Monte dei Paschi di Siena, once again dominated the agenda. A €20bn rescue fund for Italy’s banking sector was approved by the country’s parliament on Wednesday. However, shares in the bank slumped, closing 12% lower amid rumours that an attempt to raise €5bn from private investors has failed. The Italian government is now expected to step in on Thursday, and increase its 4% stake in the bank to avert a crisis. MPS released a statement (thinly veiled blackmail) announcing that it would run out of funds by April, without a major liquidity injection and restructuring.
The DJIA closed down 32 points at 19,941, the SPX fell 0.2 percent at 2,265.22 in New York. In Europe the STOXX 50 closed down 0.26%, the UK’s FTSE 100 closed down 0.04%, DAX up 0.03%, CAC down 0.33% and the Italian main index (the MIB) was down 0.16%.
Traders caused the dollar to slip back as they reduced their dollar holdings on profit taking in thin trading conditions, anticipating of a raft of U.S. economic data due on Thursday and the Christmas period. The Dollar Spot Index slipped from its fourteen year high by 0.1 percent after climbing for two consecutive days. The index has gained 7.3 percent this quarter, the biggest three month advance witnessed since the third quarter of 2008. The greenback has enjoyed a 4.5 percent gain for the year since the Nov. 9th election result, traders betting that President elect Trump and a Republican controlled Congress will embark on tax cuts and a massive fiscal economic stimulus.
The yen gained by 0.3 percent to 117.54, after falling by 0.7 percent on Tuesday. The euro added 0.4 percent to $1.043, after reaching an almost 14 year low of $1.0352 on Tuesday.
GBP/USD was trading in the region of a one month low on Wednesday, under pressure by the ongoing Brexit uncertainty. Data revealing Britain’s deteriorating public finances had little immediate impact upon release on the pound.
Towards the day’s end GBP/USD was at $1.2345, close to Tuesday’s one month low of $1.2313. GBP/USD recovered by 5 percent between mid October and mid December. The recovery ended last Wednesday when the U.S. Fed suggested three rate rises 2017. GBP/USD has lost circa 3 percent since.
Gold futures fell for a second day, sliding less than 0.1 percent to end at $1,133.20 an ounce, after closing near to a 10 month low on Tuesday. Silver spot was quoted at $15.95 towards the end of trading on Wednesday.
Economic calendar events for Thursday December 22nd, all times quoted are London (GMT) time.
13:30, currency effected – USD. Durable Goods Orders. Durable goods orders for November are expected to show a fall of -4.5% from a positive 4% previously.
13:30, currency affected – USD. Gross Domestic Product (annualised) (3Q T) the USA GDP is expected to have grown to 3.3% from 3.2%.
13:30, currency effected – USD. Initial Jobless Claims. Initial jobless claims are anticipated to have risen marginally, to 259k from 254k.
15:00, currency effected USD. Personal Consumption Expenditure Core (YoY). The previous reading of 1.7% is expected to stay unmoved according to analysts polled. This key indicator often reveals the overall mood of USA consumers.