Sergey Kamenshikov, Ph.D.
IFC Markets
US stocks ended higher on Tuesday while oil declined despite an agreement between Saudi Arabia, Russia, Qatar and Venezuela to freeze output if others do the same. The dollar strengthened mostly due to weakness in British Pound. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 1% to 96.621. The S&P 500 closed 1.7% higher at 1898.58, led by stocks in consumer discretionary and industrial sectors. The Dow Jones Industrial Average added 1.2%, settling at 16196.41, led by Boeing and Caterpillar. Shares of Apple advanced 2.8% after the company announced it would issue up to $12 billion in bonds to buy back shares and fund dividends. Equities rebounded as investors bought cheaper shares after a selloff last week. Two Federal Reserve district heads, Presidents of Boston and Philadelphia Feds respectively Eric Rosengren and Patrick Harker said on Tuesday the Federal Reserve should not hurry with raising interest rates. The economic data were not encouraging on Tuesday with the Empire State Manufacturing Index still in negative territory and National Association of Home Builders Housing Market Index falling in February.
Today investors will focus on Minutes from Federal Reserve’s January 26-27 meeting which will be released at 20:00 CET. Before then at 13:00 CET Mortgage Applications will be released in US. At 14:30 CET January Housing Starts and Building Permits will be published. Both are expected to rise. At 14:30 CET January Producer Price Index will be released. The producer price index is expected to remain unchanged. At 15:15 CET January Industrial Production and Capacity Utilization will be released. The tentative outlook is positive.
European stocks retreated on Tuesday erasing earlier gains as oil slipped after the meeting between major oil producers in Qatar. The euro weakened against the dollar to $1.1139 late Tuesday compared with $1.1167 late Monday. The Stoxx Europe 600 index ended 0.4% lower. Germany’s DAX 30 index dropped 0.8% to 9135.11 after results of ZEW survey showed the index of economic expectations in Germany fell to 1.0 in February against January’s reading of 10.2. France’s CAC 40 ended 0.1% lower. UK’s FTSE 100 closed up 0.7% despite a weaker-than-expected reading on UK inflation which weighed on British Pound. Today at 10:30 CET labor market data will be released in UK. The January unemployment rate is expected to decline to 5.0% from 5.1% while average weekly earnings over a three month period ending in December are expected to fall year-on-year to 1.9% from 2.0%. At 11:00 CET December Construction Spending will be released in euro-zone. The tentative outlook is positive.
Nikkei fell 1.4% today in a choppy trade as yen continued strengthening against the dollar and core machinery orders rose at a slower-than-expected pace in December. Tomorrow at 00:50 CET January Merchandise Trade Balance and financial data on foreign and domestic purchases of bonds and stocks will released in Japan.
Oil futures prices are declining today after market participants deemed the supply glut will most likely continue despite an agreement on Tuesday between Saudi Arabia, Russia, Qatar and Venezuela to freeze output at January levels if other producers do the same. On Tuesday WTI for March delivery fell 1.7% to $28.95 a barrel, April Brent crude declined 1.5% to $32.93 a barrel on London’s ICE Futures exchange. Investors are concerned that the agreement will not be implemented since Iran has indicated it plans to ramp up its crude oil production and exports after sanctions were lifted. Oil ministers from Iran, Venezuela and Iraq will be meeting today and an Iranian oil official has said Iran plans to increase the crude oil output to its level prior to the sanctions.
Today investors will focus on Minutes from Federal Reserve’s January 26-27 meeting which will be released at 20:00 CET. Before then at 13:00 CET Mortgage Applications will be released in US. At 14:30 CET January Housing Starts and Building Permits will be published. Both are expected to rise. At 14:30 CET January Producer Price Index will be released. The producer price index is expected to remain unchanged. At 15:15 CET January Industrial Production and Capacity Utilization will be released. The tentative outlook is positive.
European stocks retreated on Tuesday erasing earlier gains as oil slipped after the meeting between major oil producers in Qatar. The euro weakened against the dollar to $1.1139 late Tuesday compared with $1.1167 late Monday. The Stoxx Europe 600 index ended 0.4% lower. Germany’s DAX 30 index dropped 0.8% to 9135.11 after results of ZEW survey showed the index of economic expectations in Germany fell to 1.0 in February against January’s reading of 10.2. France’s CAC 40 ended 0.1% lower. UK’s FTSE 100 closed up 0.7% despite a weaker-than-expected reading on UK inflation which weighed on British Pound. Today at 10:30 CET labor market data will be released in UK. The January unemployment rate is expected to decline to 5.0% from 5.1% while average weekly earnings over a three month period ending in December are expected to fall year-on-year to 1.9% from 2.0%. At 11:00 CET December Construction Spending will be released in euro-zone. The tentative outlook is positive.
Nikkei fell 1.4% today in a choppy trade as yen continued strengthening against the dollar and core machinery orders rose at a slower-than-expected pace in December. Tomorrow at 00:50 CET January Merchandise Trade Balance and financial data on foreign and domestic purchases of bonds and stocks will released in Japan.
Oil futures prices are declining today after market participants deemed the supply glut will most likely continue despite an agreement on Tuesday between Saudi Arabia, Russia, Qatar and Venezuela to freeze output at January levels if other producers do the same. On Tuesday WTI for March delivery fell 1.7% to $28.95 a barrel, April Brent crude declined 1.5% to $32.93 a barrel on London’s ICE Futures exchange. Investors are concerned that the agreement will not be implemented since Iran has indicated it plans to ramp up its crude oil production and exports after sanctions were lifted. Oil ministers from Iran, Venezuela and Iraq will be meeting today and an Iranian oil official has said Iran plans to increase the crude oil output to its level prior to the sanctions.
This overview has an informative character and is not financial advice or a recommendation. IFCMarkets. Corp. under any circumstances is not liable for any action taken by someone else after reading this article.
Recommended Content
Editors’ Picks
AUD/USD jumps above 0.6500 after hot Australian CPI data
AUD/USD extended gains and recaptured 0.6500 in Asian trading, following the release of hotter-than-expected Australian inflation data. The Australian CPI rose 1% in QoQ in Q1 against 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY hangs near 34-year high at 154.88 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.