US equities slip as yields rise - 8.2.2018

Major US indices give up intraday gains

US financial markets ended lower on Wednesday as bond yields rose after news top senators agreed on a budget deal that would increase budget deficit. The dollar rebound accelerated: 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, rose 0.8% to 90.356. The S&P 500 fell 0.5% to 2681.66 led by energy and technology shares. The Dow Jones industrial lost 0.08% to 24893.35. Nasdaq composite index slid 0.9% to 7051.98. Index futures point to mixed openings today.

The sharp losses on Monday were triggered by fears Federal Reserve may fasten the pace of interest rate hikes after better than expected January jobs report and signs inflation is picking up. New York Fed President William Dudley said Wednesday the recent drop in the stock market wasn’t big enough to alter the economic outlook. Treasury yields rose yesterday after news top senators agreed on a two-year budget deal that would raise spending by $300 billion. The deal has to be approved by the Congress but it relieved fears of a government shutdown.

European indices follow Wall Street lead

European stocks rebounded on Wednesday as investor optimism got a boost from a bounce on Wall Street overnight and news leading German parties agreed on a deal to form a coalition government. The euro joined the British Pound’s slide against the dollar. The Stoxx Europe 600 closed 2% higher, snapping seven day losing streak. Germany’s DAX 30 gained 1.6% settling at 12590.43. France’s CAC 40 added 1.8% and UK’s FTSE 100 advanced 1.9% to 7279.42. Markets opened 0.5%-0.8% lower today.

The Tuesday rebound on Wall Street after Monday rout and the news Merkel’s conservative CDU party and the center-left SPD reached a deal to form a government in Germany boosted investors’ confidence. In economic news Germany’s industrial output slipped at the end of 2017, but the economics ministry said manufacturers’ order books signal rising production in the coming months.

China trade surplus smaller than expected

Asian stock indices are mixed today. Nikkei ended 1.2% higher at 21898.5 as yen relinquished most of previous day gains against the dollar. Chinese stocks are down as data showed a much narrower than expected trade surplus in January, weighing on yuan: the Shanghai Composite Index is 1.4% lower while Hong Kong’s Hang Seng Index is up 0.2%. Australia’s All Ordinaries Index added 0.2% despite Australian dollar rebound against the greenback.

HK50

Brent slips as US crude inventories rise

Brent futures prices are lower today on rising US domestic output. Prices fell yesterday after the US Energy Information Administration report weekly output climbed 332 thousand barrels to total 10.251 million barrels a day even while domestic crude supplies rose 1.9 million barrels last week. April Brent crude fell 2% to $65.51 a barrel on Wednesday.