US health care vote in focus - 23.3.2017

US broad market edges higher while Dow extends losses

US stock market edged higher on Wednesday lifted by technology stocks. The dollar strengthened marginally inching higher from six-week low: 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 0.06% at 99.745. The S&P 500 rose 0.2% settling at 2348.45 led by technology stocks. The Dow Jones industrial average slipped less than 0.1% to 20661.30 weighed by 7.1% drop in Nike shares on weak growth outlook. The Nasdaq index gained 0.5% closing at 5821.64.

The stock market inched higher after a selloff on Tuesday on concerns about President Trump’s ability to deliver on his promises of enacting tax cuts and massive infrastructure spending programs as conservative Republicans voiced their opposition to proposed health reform bill supported by President Trump. The bill is designed to replace the Affordable Care Act known as Obamacare but conservative Republicans say it does not go far enough in rolling back Obamacare. The recent rally was boosted by expectations of fiscal stimulus measures pledged during elections by President Trump, and signs of possible delays or doubts about implementation of measures negatively affect the established Trump reflation trade. The vote is scheduled later today and passing of the bill will boost confidence in endurance of Trump reflation trade. In economic news, sales of existing homes tumbled in February because of low inventory of previously owned homes. Today at 13:30 CET Federal Reserve Chair Yellen speaks at Community Development Conference in Washington, DC. At the same time initial jobless claims and unemployment claims will be released, the tentative outlook is neutral. At 15:00 CET February New Home Sales will be published, the outlook is positive. At 16:30 CET natural gas storage change will be released by Energy Information Administration.

Bank shares drag European markets lower

European stocks retreat to one week low on Wednesday led by bank shares. The euro weakened against the dollar while British Pound was little changed. The Stoxx Europe 600 fell 0.4% after 0.5% drop the previous day. Germany’s DAX 30 lost 0.5% to 11904.12. France’s CAC 40 slipped 0.2% while UK’s FTSE 100 index dropped 0.7% to 7324.72.

Market sentiment was dampened by perceived struggle of Trump administration to summon support for the health care bill supported by President Trump scheduled today. Doubts about President Trumps ability to deliver stimulus measures such as business deregulation, corporate tax cuts and infrastructure spending programs are forcing investors to dial back their expectations for companies’ growth prospects. Bank shares had risen significantly recently on expectations of stimulus measures with prospect of rate hikes by Federal Reserve further improving their earnings outlook as higher interest rates increase banks’ profit margins. A downgrade in these expectations hurt bank shares: Barclays shares dropped 2.4% and Deutsche Bank fell 1.7%. Today at 10:30 CET February Retail Sales will be released in UK, the outlook is positive for Pound.

Asian stocks advance

Asian stock indices are higher today with investors cautious ahead of important heath care bill vote later today in US. Nikkei ended up 0.2% in a choppy trade today as dollar inched up from four-month lows against the yen. Chinese stocks are higher as global index provider MSCI Inc is seeking feedback from market participants on whether to add Chinese shares to a widely tracked index Emerging Markets Index. An inclusion can trigger billions of dollars in capital inflows into mainland stocks. Shanghai Composite Index is 0.1% higher while Hong Kong’s Hang Seng Index is down 0.1%. Australia’s All Ordinaries Index is up 0.4% despite with the Australian dollar continuing its slide against the dollar.

Oil prices rebound after drop following US stockpile build

Oil futures prices are recovering today after briefly falling below $50 a barrel on Wednesday for the first time since November. Continued increase in US shale oil output is in focus again as market participants hope the agreed 1.2 million barrel per day output cut by the Organization of the Petroleum Exporting Countries and major producers in January-June will help rebalance the market and remove the supply overhang. The Energy Information Administration reported yesterday US inventories climbed almost 5 million barrels to a record 533.1 million last week, much higher than a 2.8 million-barrel build forecasts. May Brent crude fell 0.6% to $50.64 a barrel on Wednesday on London’s ICE Futures exchange.

Brent