News & Analysis

US Stocks Rally; Nikkei at 1996’s Levels; GBP Fresh Brexit Worries

Oct 16, 2017 | Daily Market Outlook

Key data and releases coming up:

  11:30 AEDT – AUD Monetary Policy Meeting Minutes
  18:30 AEDT – GBP CPI
  21:15 AEDT – GBP BOE Governor Carney Speaks

US stocks continued higher on Monday as earnings comes into focus. Companies have started reporting last week but this week is particularly important as companies in every sector will be reporting. Donald Trump tweeted, “Since Election Day on November 8, the Stock Market is up more than 25%, unemployment is at a 17 year low & companies are coming back to U.S.” and further stated that “The U.S. has gained more than 5.2 trillion dollars in Stock Market Value since Election Day! Also, record business enthusiasm”. Make your own mind, but the US hasn’t looked this strong and positive for a while now.

Dow Jones added 85.24, closing at new records of 22,956.96. The Dow, being so close to 23,000 is an impressive figure. S&P500 meanwhile added 4.47 points to 6624.00. The USD traded higher overnight to the AUD, EUR, GBP and JPY.

Europe was mixed as Catalan and Brexit issues returned. Spain is requesting exit clarity by this Thursday while Brexit continues to worry the GBP. UK is said to see a Brexit breakdown if EU refuses to compromise. This did the cable no favors as sellers took price lower by 63 pips at one stage. In the scheme of the last week, this drop hasn’t been too damaging yet but further falls below 1.3224 could be setting up a deeper test lower. The DAX finished 11.83 higher closing above 13,000. The FTSE lost 8.74 points.

Japan and Asia had another stronger session. The Nikkei has closed at levels not seen since 1996. The consensus is Japan’s ruling party will retain power. Chinese data also helped support US and Asian markets yesterday. China’s CPI came in as expected at 1.6% and its PPI came in stronger at 6.9% showing the economy is healthier than previously thought.

Oil rose on continued Kurd Iraqi tensions, adding 48 cents – $52.20 is the current daily high. Gold, on the other hand, settled lower by $7.74 after breaking $1303.

New Zealand’s CPI came in higher than expected this morning at 0.5% and the NZDUSD is trading 19 pips higher. The ASX200 has well and truly broken out to the upside with a gain of 20.70 points this morning trading at 5867.50 (which was May’s high) and this has all come about in a 9 day straight winning streak adding over 200 points.

USDJPY – posted a nice reversal yesterday from 111.68. Price looks to be testing a triangle pattern this morning.

Gold – divergence developing after buyers failed to stay above 1300. A new LL today could set up further downside.

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