US stocks erased early losses and closed nearly unchanged on Monday as oil prices resumed the decline after four days of gains. The dollar weakened, live dollar index data indicate the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, fell 0.6% to 99.002. The Dow Jones Industrial Average ended 0.1% lower at 16,449. Exxon Mobil was the worst performer among the Dow components, closing down 1.7%. The S&P 500 was 0.1% lower with energy and financials stocks leading the decliners, down 1.9% and 0.6% respectively. The afternoon rally reversed early losses after disappointing economic reports raised expectations Federal Reserve will implement fewer rate hikes than the four indicated by policy makers in December statement. Consumer spending was flat in December despite 0.3% rise in incomes as Americans increased their savings and paid off debts. The better than expected Institute for Supply Management manufacturing index of 48.2 in January following 48 in December indicated US manufacturing activity contracted for the fourth straight month. According to CME Group’s FedWatch tool federal funds futures traders are now pricing in only a 17% likelihood that the Fed will raise rates in March. Today at 16:00 CET February Economic Optimism Index will be released by Investor’s Business Daily. And at 19:00 CET Federal Reserve Bank of Kansas City President Esther George will speak on US economy in Kansas City.
European stocks fell on Monday as reports showing slowing of manufacturing activity in euro-zone and China undermined investor confidence. The euro strengthened against the dollar as investors reversed euro-funded trades in higher-yielding currencies of emerging economies as oil prices fell. The Stoxx Europe 600 closed down 0. 2%. Germany’s DAX 30 fell 0.4% to 9757.88, France’s CAC 40 and UK’s FTSE 100 indexes dropped 0.6% and 0.4% respectively. Lower final reading of Markit’s euro-zone manufacturing activity index of 52.3, down from 53.2 in December, added to concerns about slowing China’s economy. Benoit Coeure, member of the ECB executive board, said the bank will possibly revise its quantitative easing measures in March, indicating likely expansion of stimulus measures to boost euro-zone economy. Today at 09:55 CET German Unemployment Change and Unemployment Rate for December will be published in euro-zone. The tentative outlook is neutral. At 11:00 CET December Unemployment Rate will be released in euro-zone. No change in unemployment is expected. At the same time December Producer Price Index will come out in euro-zone. It is expected to fall 0.4% on month after declining 0.2% the previous month.
Nikkei ended 0.6% lower today as investors booked in profits after the rally following the Bank of Japan’s surprise decision last Friday to adopt negative interest rates. Chinese shares advanced today despite disappointing manufacturing data the previous day indicated manufacturing activity contracted for the sixth straight month.
Oil futures prices continue declining today after closing sharply lower on Monday on concerns of lower demand outlook from China. March WTI dropped 6% to $31.62 a barrel on the New York Mercantile Exchange after posting about a 10.8% gain in previous four trading sessions. Prices rose last week as market participants expected Russia and OPEC would start talks on cooperation to cut crude oil output. Official data today showed Russia’s oil output rose to 10.88 million barrels-per-day in January, up from 10.83 million bpd in December.