by Pinchas Cohen
Key Events
Yesterday, all three major US indexes – the S&P 500, Dow Jones Industrial Average and NASDAQ Composite, as well as Wal-Mart (NYSE:WMT) led a rally in consumer shares, and energy producers advanced in tandem with oil prices. Another event viewed positively by stability-seeking investors was Catalan President Carles Puigdemont’s decision yesterday— after earlier aggressive rhetoric—to put a declaration of regional independence on hold in order to allow for negotiations with Spain.
Though Spain's IBEX Index is moving higher this morning, having closed yesterday with a 0.9 percent loss. Spanish investors are finally going back into stocks now that the intense political situation has been scaled back. Today's IBEX boost was led by a jump in banking shares. Technical signals for the IBEX, however, indicate it could be headed lower once more.
Spanish bonds rallied, even as major European bonds declined. Some traders assessed the previous decline in Spanish bonds as too pessimistic.
The EURUSD got a boost of confidence on the Catalonia news. The single currency has maintained yesterday’s 0.7 percent gain and slightly extended its rally, its third straight daily gain. Provided it closes here, or higher, it will have reached its highest level in almost two weeks. The developing Head & Shoulders top noted in yesterday's post, continues to develop, signaling more potential upside ahead for the currency pair.
Global Financial Affairs
The invigorated risk-on sentiment rippled through the time zones and into Asia-Pacific trading. Japan’s TOPIX recorded its highest close in a decade; its sister index the Nikkei 225 closed at a fresh near 21-year high. Equities in Sydney and Seoul also climbed.
Oil advance beyond the $51 level, as OPEC predicted robust crude demand next year, along with a pledge provided by Saudi Arabia to reduce monthly crude exports, a disruptive supply dynamic in response to the devastating hurricanes. The weaker dollar, down 0.5 percent, also helped boost demand for the dollar-denominated commodity.
The dollar has been drifting, as investors await minutes from the last Federal Reserve meeting. The question is if this is the calm before the storm? Investor focus is now on further confirmation of a December hike by a rarely divided Fed.
Treasuries received a small boost yesterday, after President Donald Trump said that he plans to make changes to his tax plan within the next few weeks and dismissed concerns that his public spat with Senator Bob Corker would interfere with the passage of the plan.
A drop in industrial metals led miners lower, interrupting what may have become a global risk-on sentiment, keeping stocks from rising yet further in Europe.
Up Ahead
- Minutes from the most recent Federal Reserve meeting are due Wednesday.
- API and EIA crude data have been delayed to Wednesday and Thursday, respectively, because of Monday’s U.S. holiday.
- Earnings season begins, with for major U.S. banks up first, led by JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) which report on Thursday; Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) report on Friday.
- The active Atlantic hurricane season will probably figure prominently in U.S. data on retail sales and consumer prices, both due Friday.
Market Moves
Stocks
- The Stoxx Europe 600 Index fell less than 0.05 percent as of 8:29 London time (3:29 EDT).
- The U.K.’s FTSE 100 climbed 0.4 percent, its highest in two months.
- Germany’s DAX dipped 0.2 percent, the lowest point for the index in more than a week on its biggest decrease in more than five weeks.
- S&P 500 Futures dipped 0.1 percent.
Currencies
- The Dollar Index fell 0.05 percent to the lowest in a week, after attempting a 0.15 percent rise.
- The euro gained 0.1 percent to $1.1823, the strongest in more than two weeks.
- The British pound decreased 0.1 percent to $1.3195.
- The Japanese yen increased 0.1 percent to 112.34 per dollar, the strongest in more than two weeks.
Bonds
- The yield on 10-year Treasuries fell one basis point to 2.35 percent, the biggest drop in more than a week.
- Germany’s 10-year yield gained two basis points to 0.46 percent, the largest rise in two weeks.
- Britain’s 10-year yield rose one basis point to 1.363 percent.
Commodities
- West Texas Intermediate crude increased 0.2 percent to $51.02 a barrel, the highest in more than a week.
- Gold rose less than 0.05 percent to $1,288.58 an ounce, the highest in more than two weeks.