News & Analysis
US Stocks new records – Banks Falter; USD lower; Oil touches $58 – Inventories Mixed; Gold tests $1287
Today’s high impact news:
▸ 12:30 Chinese CPI – PPI
▸ 00:30 USD Unemployment Claims
▸ 03:00 CHF SNB Chairman Jordan Speaks
US stocks edged to new highs overnight but banks traded lower for the fourth session in a row. The USD traded lower as tax reform worries continue. Inventories came out mixed, oil had a volatile session trading in a 153 cent range.
Overnight, US stocks finished higher the Dow Jones added 6.13 points. The S&P500 added 3.74 points and the NASDAQ closed 21.33 points higher. Despite the gains bank stocks closed lower, the SPDR S&P bank exchange-traded fund (KBE) fell 0.7 percent and notched its fourth straight negative session. Bank of America was among the worst performers in the ETF, sliding 1.5 percent. The banks fell after Republicans lost key elections in New Jersey and Virginia on Tuesday. These losses increase uncertainty around the GOP’s plans to move forward with tax reform. Banks were also pressured by a flattening yield curve. The spread between the two and the 10-year U.S. bond yields hovered around 70 basis points, its lowest level in a decade. A flattening yield curve is sometimes the precursor of an inverted curve, which has been a rescission warning. For now, “I’m not worried because, if you look at balance sheets and corporate earnings, they are still pretty good,” said Ninh Chung, head of investment strategy and portfolio management at Silicon Valley Bank. “But if we get an inverted yield curve, that would be more concerning.”Over the past year, banks have easily outperformed the broader market. The KBE is up 26 percent since November 2016, while the S&P 500 has gained 21 percent in that time period.
The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump’s tax reform plans. The lower dollar spurred gains for the AUDUSD and Gold which finished the session higher. The AUDUSD continues to hold above .7624. Gold rallied $6, at one point in the session traded $12.29 higher testing $1287, a new high for the week. Oil had a volatile session as crude inventories came in higher than expected, this was offset by a fall in gasoline stockpiles. Price surged 94 cents higher to $58 a new 2017 high before paring gains to settle 18 cents lower. 153 cent daily ranges can be fun or extremely painful depending on the type of trader you are : )
In Europe, the DAX closed slightly higher adding 3.15 points. The FTSE closed 16.16 points higher. Earnings continued to shake up sentiment in Europe, with the retail sector getting a boost from individual stock news. The EUR had a mixed night finishing slightly higher to the USD and slightly lower to the JPY. The EURJPY retested 131.45 support trading 61 pips lower at one stage. The GBP lost ground to the USD closing 49 pips lower. The GBPUSD and GBPJPY continue to trade in daily ranges.
The ASX200 is trading higher today continuing to trade above 6000, key Chinese data is due out at 12:30, traders will be looking for positive figures to show continuing strength in the Chinese economy.
EURJPY – sellers retested key support level overnight. Buyers emerged once tested to continue to hold above these two levels. We have seen these levels hold for buyers since the 26th of September.
Good trading from Eightcap.
Sources; Reuters, CNBC
* The information provided here has been prepared by EightCap’s team of analysts. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and do not reflect the opinions of EightCap.
In addition to the disclaimer on our website, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. EightCap accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.
Please note that past performance is not a guarantee of or prediction of future performance. This communication must not be reproduced or further distributed without prior permission.