Technology stocks rebound lifts markets - 14.6.2017

SP 500 and Dow close at records

US stock indices ended at record high on Tuesday as technology stocks rebounded after two-day selloff. The dollar slipped ahead of Federal Reserve’s interest rate decision due today: 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 0.14% lower at 97.008. Dow Jones industrial average added 0.4% closing at 21328.47. The S&P 500 gained 0.5% settling at 2440.35 led by materials and technology stocks. The Nasdaq index rose 0.7% to 6220.3.

The technology selloff didn’t end in a broad market correction resulting instead in a rotation into energy and financial sectors. As the Federal Reserve concludes its two day policy meeting today investors will be watching closely what the central bank says about the current state of US economy after weaker than expected recent data, particularly disappointing May nonfarm payrolls. Despite the weak data market participants see a quarter percentage point interest rate hike as virtual certainty at 99.6% likelihood, according to CME Group’s FedWatch tool. The Federal Reserve is expected to lift rates four times this year as indicated by policy makers projections of interest rate path, the so called dot plots, since December 15, 2016. Investors will focus on signals of any expected slowdown in the pace of rate hikes which might result from weaker than expected data. The producer price index reading for May showed no change following an 0.5% increase in April, which doesn’t point to a rise in inflation. Today at 14:30 CET May inflation and advance retail sales will be published, the outlook is not positive for the dollar. At 16:00 CET April business inventories will be released, the outlook is negative. And at 20:00 CET the Federal Reserve interest rate decision will be published, followed by Fed Chair Yellen’s press conference at 20:30 CET.

SP 500

European markets recover led by technology stocks

European stock indices recovered on Tuesday led by rebound in technology sector. Both the euro and British Pound inched higher against the dollar. The Stoxx Europe 600 rose 0.6%. Germany’s DAX 30 gained 0.6% closing at 12764.98. France’s CAC 40 added 0.4% and UK’s FTSE 100 ended 0.2% lower at 7500.44.

The 2.9% UK inflation in May, at four year high and higher than expected, supported the British Pound. Pound is under pressure in light of political turmoil following last Thursday’s UK election that resulted in hung parliament where no party has a majority. In other economic news, German economic sentiment unexpectedly declined in June according to ZEW center for European economic research. Today at 10:30 CET April labor market data will be released in UK, the outlook is neutral for Pound. And at 11:00 CET April euro-zone industrial production will be published, the outlook is positive for euro.

China's industrial output grows at a steady pace

Asian stock indices are mixed today as investors are cautious ahead of Federal Reserve’s monetary policy decision. Nikkei slipped 0.1% to 19883.52 despite a weaker yen against the dollar. Chinese stocks are down amid concerns about heightened regulatory scrutiny after reports the chairman of major financial firm Anbang was temporarily unable to fulfil his duties, just over a week after denying reports he had been barred from leaving the country. Data showed China's industrial output growth and retail sales held steady in May but fixed investment growth slowed down. The Shanghai Composite Index is down 0.7% while the Hong Kong’s Hang Seng Index is up 0.1%. Australia’s All Ordinaries Index added 1% despite continued strengthening of Australian dollar against the greenback.

Oil down on rising output

Oil futures prices are lower today on OPEC report of a rise in its production despite the agreement to cut back on output. OPEC said in monthly report its output rose by 336000 barrels per day (bpd) in May to 32.14 million bpd due to higher output from Libya, Nigeria and Iraq. Data from the American Petroleum Institute showed late Tuesday US crude stocks rose by 2.8 million barrels last week to 511.4 million, instead of an expected 2.7 million barrels draw. August Brent crude closed 0.3% higher at $48.29 a barrel on London’s ICE Futures exchange on Tuesday.