News & Analysis

Dow Jones lower after Fed holds signals June rise; DAX surges +1.51%; USD mixed after Fed – EUR and GBP continue lower

May 3, 2018 | Daily Market Outlook

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US markets – traded lower on Wednesday, markets falling in the last hour of trade. Apple finished 4% higher but failed to hold the Nasdaq in positive territory. The Fed kept interest rates unchanged, as was largely expected. The central bank’s policymaking committee also noted that “overall inflation and inflation for items other than food and energy have moved close to 2 percent.” Analysts are starting to look to June for a possible increase. In other economic news, mortgage applications dropped 2.5 percent as rates reached their highest levels in nearly five years. ADP payrolls grew by 204,000 in April, more than the expected 200,000.

Earnings season continued Wednesday with CVS Health and Estee Lauder among the companies that reported earnings that beat analyst expectations. Garmin and Clorox also posted stronger-than-forecast results.

The Dow Jones lost 174.07 points. The S&P500 lost 19.13 points and the NASDAQ closed 129.81 points lower.

European markets – rose on Wednesday with the DAX having a day out. Tech stocks were among the top performers. Shares of chipmakers Austria Microsystems and STMicroelectronics rallied after Apple reported strong second-quarter earnings. The European Commission proposed a bigger budget for the soon-to-be 27 member bloc. The proposal, which will apply from 2021 to 2027, aims to cut farm subsidies and increase spending on research and technology. Eurozone manufacturing PMIs showed a slowdown in activity. The final March reading came in at 56.2 moving to a 13-month low.

The FTSE closed 22.84 higher. The DAX jumped adding 190.14 and the CAC closed 8.73 points higher.

Oil – recovered on Wednesday but trimmed gains after crude inventories showed a surprise build mainly on the west coast. Oil finished 17 cents higher. Buyers did hit 68.02 earlier in the session. Crude stockpiles posted a surprise build of 6.2 million barrels in the week, according to the U.S. Energy Information Administration. Nearly 5 million barrels were concentrated on the West Coast.

“That’s why the market isn’t reacting that much, because sometimes the West Coast numbers are erratic and usually when you get a big build in the West Coast, it’s followed with a big draw the next week,” said Phil Flynn, an analyst at Price Futures Group. “The market is putting that in perspective,” he said. At the same time, demand for distillate fuels like diesel was strong, he said, offsetting the downward pressure on crude. Oil continues to sit in its daily price range.

Forex – mixed night as the USD fell on the rate hold but recovered losses. The USDCAD parred loses to finish 40 pips higher. The USDJPY finished flat. Doubt the ECB will normalize its policy continues to pressure the EUR as it finished lower to the USD. The EURUSD fished 39 pips lower hitting a new weekly low. Better construction data lifted the GBP during the London session, expectations the BOE will hold rates next week and recovering USD sent the GBPUSD 40 pips lower, also hitting new weekly lows.

The AUDUSD snapped a two-day losing streak to close slightly higher but below .75. Buyers have moved back above .75 in this morning’s trade. Gold bounced back after the US rate hold but parred gains closing $1.46 higher.

Traders will now be looking to tomorrow night’s US employment data.

AUS200 continues to kick goals moving above 6082 this morning. Bulls have 6100 and then we’re getting back to highest points set in 2017.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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