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Fed Minutes helps lift US stocks – Europe ends lower; Oil lower after stockpile increase; Yen surge hammers majors

May 24, 2018 | Market Updates

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US markets – looked very bleak in the premarket with futures trading 180 plus points lower. Target missing earnings, new negative developments in the US-China trade negotiations plus issues in Europe and Turkey all influenced. Sellers jumped out of risk and bought into safe havens. Once the US session got going buyers where supported by gains in Boeing and McDonald’s. Apple, Amazon, Facebook and Netflix led technology stocks higher. The last drive came later in the session, the Fed minutes showed Federal Reserve said it would be comfortable letting inflation temporarily run above its inflation target.

This gave stocks a boost and lead to treasury yields lower. Specifically, the minutes said, “a temporary period of inflation modestly above 2 percent would be consistent with the Committee’s symmetric inflation objective.” Though the general tone was that inflation would continue to rise, there was disagreement over how confident the Fed should be after undershooting its target for so long, with some members amenable to letting the prices climb higher. “The market was bracing for a hawkish tone to the meeting minutes and what they got was symmetric and balanced in terms of the language,” said Michael Arone, chief investment strategist for State Street Global Advisors. “Stocks reacted well. Traditional defensive sectors, ones that have been negatively impacted by higher rates, are those that are leading the market today.”

Stocks parred solid loses to finish higher for the session. The Dow Jones added 52.40 – The S&P500 added 8.85 and the NASDAQ closed 47.50 points higher.

Europe – traded in the red last night with heavy fall seen the DAX in particular. The FTSE fell by 89.01 – the DAX lost 193.08 and the CAC dropped by 74.25 points. Europe was hit by multiple issues, Italian government uncertainty and trade jitters to of the main drivers. A sell-off in Italy’s government bonds resumed on Wednesday amid uncertainty over the creation of an anti-establishment government in Rome. Eurozone consumer confidence fell to 0.2 points in May from 0.3 points in the previous month. President Donald Trump said Tuesday he was not satisfied with recent negotiations between the U.S. and China.

Oil – dipped on Wednesday as US stockpile showed an unexpected increase. U.S. commercial crude inventories rose by 5.8 million barrels in the last week, compared with analysts’ expectations for a decrease of 1.6 million barrels. Gasoline stockpile levels also surprised the market by jumping 1.9 million barrels a day, while distillate inventories fell slightly less than expected. OPEC also weighted, as OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply.

U.S. crude oil exports dropped by more than 800,000 barrels a day last week to about 1.75 million barrels a day. Meanwhile, crude imports were up by 558,000 barrels and refiners produced less distillate fuel, which includes diesel and heating oil. USOUSD finished the session 33 cents lower at $71.75.

Forex – one-way traffic really last night as the USD and the Japanese Yen surged. The Yen led the charge hammering basically anything in its path. Multiple negative influences set safe-haven buying off. Into the London session, we saw some massive single day falls on risk. The EURJPY lost 234 pips at one stage, the AUDJPY traded 146 pips lower to its low. The USDJPY 135 pips lower. Buyers did par some loses late into the NY session after the FED minutes but, sellers are back at it again today. All the majors are taking a new beating so far today. The USD drove higher to risk most of last night, the USDCAD traded 99 pips higher before being faded again from the 1.2915 area. Gold held firm despite the USD driving higher, it did rally by $7.28 at one stage before settling at 1293.35. Bitcoin returned to the seller radar, price is trading back below 8k.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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