by Pinchas Cohen
Key Events
The S&P 500 and Dow hit new records again yesterday, and today the dollar is on track for its fifth straight gain, on speculation the next Federal Reserve Chairperson will steer the Central Bank on a faster path to higher interest rates. Global stocks however, remain suspended today, as investors take a breather, awaiting fresh clues from central bankers, including ECB President Mario Draghi, who is scheduled to speak later today.
Global Financial Affairs
The dollar has also received a boost from its biggest currency exchange partner, the euro, whose performance is a mirror-image of the USD.
The single currency appears to be headed toward its fifth straight loss as investors await the deadline on Catalonia’s efforts to secede from Spain. The region, which is responsible for 20 percent of the country's economic output, has already cost Spain 0.3 percent in growth, and the Spanish government forecasts the political uncertainty thus far will lead to growth of just 2.3 percent next year instead of the 2.6 percent expansion previously projected.
Sterling's troubles may be helping the dollar as well.
Cable's decline extended, after testimonies by BOE Governor Mark Carney and other UK policy makers left investors questioning whether the Bank of England is committed to raising interest rates, something it hasn't done in more than ten years, since July 2007, even after UK inflation hit 3 percent.
Much like yesterday when, after a record US close on Monday, stocks in Asia were mixed on the threat of a nuclear attack by North Korea, similarly, today’s Asian trading has been mixed, even though the Dow briefly traded above the new 23,000 milestone during Tuesday's session.
During the Asian session, the biggest gainer was China's Shanghai Composite, up 0.3-percent, after Chinese President Xi Jinping, in his opening speech at China's Communist Party Congress, drew a roadmap in which he predicted that China will be the leading global power by 2050.
The Stoxx Europe 600 Index is taking a wait-and-see approach after Asia's mixed session and thus far has remained unchanged.
The continuous upward trajectory for the dollar, as well as the second day of mixed Asian markets after additional US records, may suggest that risk-on remains in play for US assets, despite lackluster performance in Asian and European markets. However, that doesn’t mean US stocks will continue making records today. The dollar may simply be gaining because it's the default currency versus other majors such as the euro and the pound.
The answer to who will be the Fed's next chief has gripped markets, but investors will have to be patient about the big reveal. The announcement won't be made before President Donald Trump leaves on November 3 for an 11-day trip to Asia, according to a report. Nevertheless, each new report or additional piece of gossip is certain to create volatility. As well, Trump, perhaps in an effort to revive the Trump Trade, tried to rally support for his tax plan in a speech on Tuesday.
Oil extended gains in early trading, as signs of declining US stockpiles suggested steady demand. However, the price has pared the early gains and as 4:00 EDT is flat with yesterday’s close. If the commodity can break past $53, we could see another leg higher for the current rally. As well, there are two key fundamental risks that could drive oil's price in the short and longer term.
Up Ahead
- ECB boss Mario Draghi is set to speak at the “Structural Reforms in the Euro Area” conference in Frankfurt, today.
- New York Fed President Bill Dudley and Dallas Fed President Robert Kaplan are both scheduled to speak today.
- Tomorrow, (this evening in the US) China reports GDP, Industrial Production and Retail Sales data.
Market Moves
Stocks
- Though traders twice tested the Dow's 23,000 milestone yesterday—each time for just under a minute—ultimately the index closed just a hair below, at 22,997.44.
- Japan's TOPIX eked out a gain of less than 0.1 percent.
- Australia's S&P/ASX 200 closed flat.
- South Korea's KOSPI Index also closed flat.
- While the Hang Seng Index closed lower in Hong Kong, the Shanghai Composite was the leader in Asia with a 0.3 percent advance.
- Both the MSCI Asia Pacific Index as well as the MSCI Emerging Markets Index remained flat.
- The Stoxx Europe 600 Index gained 0.1 percent as of 8:27 London time (3:27 EDT).
- The U.K.’s FTSE 100 climbed 0.2 percent.
- Germany’s DAX dipped 0.1 percent, the first retreat in a week for the index and the biggest decrease in more than a week.
- S&P 500 Futures advanced less than 0.05 percent to the highest on record.
Currencies
- The Dollar Index extended gains for a fifth day to a rally higher 0.12 percent.
- The euro advanced less than 0.05 percent to $1.1767, its first advance in a week.
- The British pound dipped 0.1 percent to $1.3181, the weakest in more than a week.
- The Japanese yen declined 0.2 percent to 112.41 per dollar, the weakest in a week.
Bonds
- The yield on 10-year Treasuries climbed one basis point to 2.31 percent.
- Germany’s 10-year yield fell less than one basis point to 0.36 percent.
- Britain’s 10-year yield dipped one basis point to 1.276 percent, the lowest in almost five weeks.
Commodities
- West Texas Intermediate crude gained 0.5 percent to $52.14 a barrel, the highest in more than three weeks.
- Gold fell 0.1 percent to $1,283.73 an ounce, the weakest in more than a week.