Markets advance on upbeat Yellen testimony - 15.2.2017

US stocks climb to new record highs fourth session in a row

US stocks closed at fresh record highs for fourth session in a row on Tuesday on Fed chair Yellen’s upbeat assessment of US economy. The dollar strengthened further after Yellen signaled that the central bank could gradually raise interest rates sooner than later. 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 0.22% higher at 101.221. Dow Jones industrial average rose 0.5% to 20504.41 led by JP Morgan and Goldman Sachs shares, up 1.6% and 1.3% respectively. The S&P 500 added 0.4% settling at 2337.58 led by financial and healthcare stocks. The Nasdaq index closed at record high of 5782.57, gaining 0.3%.

In her testimony, which appeared to be more hawkish than expected, Fed chair Yellen said the US economy was expected to continue growing at a moderate pace. At the same time, she commented that it would be ’unwise to wait too long to tighten’ mentioning signs of inflation and wage growth, and that the central bank will consider raising interest rates at its coming meetings. This was interpreted as leaving the door open for a rate hike at March policy meeting. Treasury yields rose, lifting the dollar. In other economic news, producer price growth accelerated in January at the fastest pace since 2012. Today at 13:00 CET Mortgage applications will be released by the Mortgage Bankers’ Association in US. At 14:30 CET January inflation will be reported, the tentative outlook is positive for dollar. At the same time January advance retail sales will come out, a lower figure compared with the previous month is expected. At 15:00 CET January industrial production is expected to come out steady after 0.8% rise in December. At 16:00 CET Fed Chair Yellen will testify before House Financial Services Committee. And at 18:45 CET Federal Reserve Bank of Philadelphia president Harker will speak on economic outlook in Philadelphia.

DJI

European equities inch higher despite lower than expected GDP reports

European markets closed marginally higher on lower than expected economic growth from Germany and the euro-zone. Both the euro and British Pound weakened against the dollar. The Stoxx Europe 600 rose less than a point while Germany’s DAX 30 slipped 0.02% to 11771.81. France’s CAC 40 overperformed gaining 0.2% and UK’s FTSE 100 lost 0.1% to 7268.56.

Disappointing data weighed on investor confidence as economic growth for Germany and the euro-zone came in weaker than expected: fourth-quarter GDP expanded by 1.7% in Germany, less than a 1.8% forecast, while euro-zone GDP growth was lowered to 0.4% from 0.5%. And in UK, consumer prices rose 1.8% in January, less than the 1.9% rise expected, which prompted the Pound weakness. Today at 10:30 CET UK labor market report will be released, the outlook is neutral for British Pound. At 11:00 CET December euro-zone trade balance will be published, the tentative outlook is negative for euro.

Asian markets rise on upbeat US economic outlook

Asian stock indexes are up today with investors risk appetite bolstered by continued rally on Wall Street as Fed Chair Yellen provides an upbeat outlook for US economy at her Senate testimony. Nikkei ended 1% higher at 19519.44 as yen extended losses against the dollar. Gains were led by insurer stocks on higher bond yields spurred by hawkish testimony of Federal Reserve Chair Janet Yellen. Chinese stocks are down with the Shanghai Composite Index is 0.1% lower while Hong Kong’s Hang Seng Index is 1.2% higher. Australia’s All Ordinaries Index is up 0.8% with the Australian dollar edging lower against the dollar.

Oil prices decline

Oil futures prices are edging lower today on renewed concerns how long the Organization of the Petroleum Exporting Countries (OPEC) producers would be able to maintain their high compliance with output cuts. OPEC and other producers including Russia agreed in December to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017. OPEC data Monday showed the group’s production in January declined by 890 thousand barrels a day from the previous month to 32.14 million barrels a day, a 90% compliance level so far. The American Petroleum Institute reported yesterday US crude stocks rose by 9.9 million barrels last week while a 3.25 million barrels increase is expected according to S&P Global Platts. Prices closed higher on Tuesday, with April Brent crude closing 0.7% higher at $55.97 a barrel on London’s ICE Futures exchange on Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.