Strong US employment data boost rate hike expectations - 9.3.2017

US stocks fall third session in a row

US stock indices closed lower third session in a row as energy stocks fell dragged by a slump in oil prices and strong employment data reinforced expectations of a rate hike next week. The dollar further strengthened: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, closed up 0.3% at 102.112. The S&P 500 lost 0.2% settling at 2362.98 led by energy stocks which offset gains in consumer discretionary and health care sectors. The Dow Jones industrial average fell 0.3% to 20855.73 led by Caterpillar and Chevron, down 2.8% and 1.97% respectively. The Nasdaq index managed to record a gain closing up less than 0.1% at 5837.55.

The stock market rally which started after US presidential election fueled by expectations of fiscal stimulus measures pledged by President Trump has stalled as Federal Reserve officials recently expressed their support for a rate hike at March 14-15 FOMC meeting. Automated Data Processing Inc. reported Wednesday ahead of official monthly jobs report due Friday the private sector added 298 thousand jobs in February. A strong official number will make a rate hike next week all but certain. In other economic news, wholesale inventories for January fell 0.2%. Today at 14:30 CET Initial Jobless Claims and Continuing Claims, will be released in US. The tentative outlook is neutral. And at 16:30 CET Natural Gas Storage Change will be released by the Energy Information Administration.

Optimism about US economy lifts European stocks

European stocks closed higher on Wednesday with market sentiment buoyed by stronger than expected private sector jobs report in US. Both the euro and British Pound continued the slide against the dollar. The Stoxx Europe 600 rose 0.1% in a choppy session. Germany’s DAX 30 gained less than 0.01% to 11967.31. France’s CAC 40 added 0.1% while UK’s FTSE 100 index slipped 0.1% to 7334.61.

Investors refrained from making big bets ahead of the European Central Bank’s policy decision on Thursday and Friday’s US monthly jobs report. It is widely expected the ECB will leave the policy unchanged, but investors will be watching closely for any change in central bank’s economic forecasts as the headline inflation reached the target 2% in euro-zone recently. In economic news German industrial production rose sharply in January, by 2.8%, despite a drop in manufacturing orders at the start of the year. The UK government unveiled its spring budget, the last before Brexit negotiations begin, and Chancellor Philip Hammond said the 2017 forecast for British economic growth was upgraded to 2% from a previous estimate of 1.4%, but that growth is expected to slow in 2018. Today at 11:30 CET the Economic Outlook of Organization of Economic Cooperation and Development will be published. At 11:00 CET the European Central Bank will release the interest rate decision, no change in policy is expected. And at 14:30 CET the ECB press conference will start.

GB 100

Asian stocks down

Asian stocks are mostly lower today after a slump in oil prices as investors await the ECB interest rate decision and US monthly jobs report Friday. Nikkei snapped the four session losing streak today closing 0.3% higher at 19318.58 on the back of weaker yen against the dollar. Chinese stocks are lower after data showed consumer prices were weaker than expected rising 0.7% in February instead of expected 1.7% while producer prices rose at the fastest pace since 2008. Shanghai Composite Index is 0.7% lower while Hong Kong’s Hang Seng Index is down 1.1%. Australia’s All Ordinaries Index is down 0.3% with the Australian dollar little changed against the dollar.

Oil prices rebound after sharp US stockpile build

Oil futures prices prices are recovering today after official data showed US crude stockpiles rose by 8.2 million barrels last week when a build of just 2 million barrels was expected. US inventories hit a record level of 528.4 million barrels after ninth climb in a row as US crude production last week reached a more than one-year high. May Brent crude fell 5% to $53.11 a barrel on Wednesday on London’s ICE Futures exchange.