US stocks rallied on Wednesday after bullish minutes of Federal Reserve October meeting boosted investor confidence in US economy. Live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six currencies, ended up 0.1% at 99.71. Market reaction to the prospect of monetary tightening by the Federal Reserve was the opposite of usual sell off of stocks in anticipation of higher borrowing costs. The prospect of interest rate hike this time after a long period of ultra-loose monetary policy was interpreted by investors as a positive reading for the strength of economy, prompting buying of risky assets. The S&P 500 closed higher 1.6% at 2,050.44, the biggest gain in four weeks, as all ten main sectors advanced led by health care, up 2%. The Dow Jones Industrial Average gained 1.8%. Apple’s shares closed up 3.2% after Goldman Sachs added the stock to its “conviction buy” list, forecasting 43% expected stock gain from current levels. The stock provided the biggest boost to the three major indexes. In economic news US housing starts fell 11% to a seven-month low. But permits for single-family homes, which account for about three-quarters of the housing market, rose to their highest level since the end of 2007, suggesting the housing market remained on solid ground. Today at 13:30 CET Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is positive. At 14:30 CET Philadelphia Fed’s Manufacturing Index will be released. The tentative outlook is negative. At 16:00 CET October Leading Indicators will be published by the Conference Board. The tentative outlook is positive. At 18:30 CET Federal Reserve Bank of Atlanta President Dennis Lockhart speaks on economy in Atlanta.
European stocks fell on Wednesday with travel stocks finishing in the red zone again after police raids in Paris connected to last week’s attacks. The euro hit seven month low against the dollar but rebounded, closing 0.12% higher after the Federal Reserve minutes were not as hawkish as expected. The Stoxx Europe 600 closed down 0.1%, Germany’s DAX 40 was down 0.1%, France’s CAC 40 lost 0.6%. British Airways parent International Consolidated Airlines Group slumped 3.1%, Deutsche Lufthansa slipped 1.3%. Shares of Air Liquide SA sank 7.4% as investors deemed the $13.4 billion price the French industrial-gas company plans to pay for acquiring US Airgas Inc. too high. Today at 10:00 CET September Current Account will be released in euro-zone. At 10:30 CET October retail sales will be published in UK. The tentative outlook is negative. At 13:30 CET European Central Bank will publish October policy meeting minutes.
Nikkei rose 1.1% to three-month high today on the backdrop of falling merchandise exports and decision of the Bank of Japan to keep the current pace of monetary expansion at 80 trillion yen annually. Data showed exports in October fell 2.1% year-on-year for the first time in more than a year, but rebounded 0.6% from September.
Oil futures prices are extending gains today after closing higher on Wednesday despite the data indicating 252000 barrels rise last week in US crude inventories. With no sign that the market is rebalancing given the persistent oversupply and rising US stockpiles, the outlook remains bearish.
Gold is rebounding today after gold for immediate delivery fell to five year low on Wednesday on anticipation of interest rate hike in December. Industrial metals are near five-year lows.