Global equities advance after limited fallout following Italian referendum - 7.12.2016

Dow Jones hits second record high in two days

The Dow Jones industrial average closed at a fresh record high on Tuesday for a second day in a row as the uptrend continued. The dollar strengthened on positive factory orders data: 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 0.3% higher at 101.465. The Dow Jones industrial average gained 0.2% to 19251.78, led by 1.2% advance in Goldman Sachs shares. The S&P 500 rose 0.3% settling at 2212.24 with financial stocks leading the gains. The Nasdaq index outperformed gaining 0.5% to 5333.00.

Upbeat factory data supported the view the US economy is accelerating after sluggish performance in the first half of the year, with President-elect Donald Trump’s proclaimed preference for expansionary fiscal policy measures such as tax cuts and infrastructure spending projects further fueling expectations of improved growth. Factory orders jumped 2.7% in October, the fourth straight monthly gain and the largest since January 2015, according to the Commerce Department. On the negative note the US trade deficit jumped almost 18% in October with stronger dollar contributing to bigger imports, which actually hit the highest level in 14 months. Based on recent positive data investors expect the Federal Reserve will hike rates at December policy meeting, with fed funds traders pricing a 92.7% chance of a quarter percent hike according to the CME’s FedWatch tool. Today at 13:00 CET Mortgage applications will be released by the Mortgage Bankers’ Associations in US. At 14:15 CET November Employment Change will be released by Automatic Data Processing, Inc.. The tentative outlook is positive. At 16:00 CET October Job Openings and Labor Turnover Summary results will be published, the outlook is positive. And at 16:30 CET Crude Oil Inventories will be released by the Energy Information Administration. Today the Bank of Canada will announce the interest rate decision at 16:00 CET. The central bank is expected to leave the interest rate unchanged at 0.5 %.

Recovery in Italian stocks leads European markets higher

European stocks closed higher on Tuesday for the second session in a row helped by strong gains in bank shares and utilities. Both the euro and the British Pound weakened against the dollar. The Stoxx Europe 600 ended 1% higher. Germany’s DAX 30 ended 0.9% higher at 10775.32. France’s CAC 40 outperformed rising 1.3% and UK’s FTSE 100 index gained 0.4% closing at 6779.84..

The recovery of Italian bank shares led financial stocks and euro-zone markets higher after sharp losses on Monday on concerns about uncertain future of Italian banks after Italian prime minister Matteo Renzi announced his resignation following the defeat in Sunday referendum on constitutional reform proposal. Italian banks need recapitalization as they struggle with more than €200 billion in bad deb. Investors are focusing now on European Central Bank’s meeting scheduled for Thursday with many analysts expecting an extension of central bank’s asset purchases program set to end in March. Utility shares were led by strong gains in German utilities after a German court decision that parts of the government’s nuclear phaseout law are unconstitutional, opening the door for utility companies to sue for damages. Shares of Germany’s E.On rallied 5% and RWE shares gained 1.5%. Today at 10:30 CET October Industrial and Manufacturing Production will come out in UK, the outlook is positive for Pound.

FTSE 100

Australia GDP falls in third quarter

Asian stocks are rising today with investor confidence buoyed by global market response to Italian referendum results on Monday. Nikkei ended 0.7% higher today at 18,496.69 points with weaker yen boosting exporter shares. Shares of SoftBank rallied 6.2% after the company announced plans to invest $50 billion in US companies. Chinese stocks are advancing with investors cautious about the impact of increased scrutiny by China’s insurance regulator which said it would inspect insurance funds to minimize possible financial risks brought by massive stake buyouts by big insurance companies. Investing in stocks by insurers in China has contributed to the Shanghai market’s advance recently and slowing of purchases may result in lower support for the market. The Shanghai Composite Index is 0.7 higher while Hong Kong’s Hang Seng index is up 0.5%. Australia’s All Ordinaries Index rose 0.9% with Australian dollar declining against the dollar on the report the gross domestic product fell for the first time in five years.

Oil prices retreat despite expected US inventory decline

Oil futures prices are edging lower today as traders are getting skeptical about the impact of planned OPEC oil output cuts on global supply glut in light of record production in both OPEC and Russia since the deal was announced. February Brent crude, the global oil benchmark, fell 1.8% to $53.93 a barrel on London’s ICE Futures exchange yesterday. At 16:30 CET today Crude Oil Inventories will be released by the Energy Information Administration, a reduction in crude inventories is expected.