US stocks rise despite mixed data - 24.5.2017

US stocks post fourth straight session of gains

US stocks ended higher on Tuesday fourth session in a row after the release of 2018 budget proposal by White House spurred expectations of progress with president Trump’s pro-growth policies like tax cuts and infrastructure investments. The dollar rebounded: 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, ended 0.4% higher at 97.355. Dow Jones industrial average rose 0.2% to 20937.91, led by Goldman Sachs and JP Morgan shares. The S&P 500 added 0.2% settling at 2398.42 led by financial and health-care stocks, with ten out of 11 main sectors ending higher. The Nasdaq index closed up less than 0.1% at 6138.71 in a choppy trade.

Treasury yields rose yesterday after the White House released its budget proposal. While it shows which programs the administration sees as priorities it is a White House budget request which most likely will not survive in its present form in Congress. Investors focused on Fed officials’ comments ahead of the release of Federal Reserve May meeting minutes today. Minneapolis fed President Neel Kashkari, a known dove and voting member of central bank’s interest rate setting committee, said the soft inflation reading were “concerning”. March and April inflation was weaker than expected. Philadelphia Fed President Patrick Harker indicated no change in Fed’s interest rate hike path of two more hikes this year saying he is not concerned about weak first quarter GDP and has not “lost faith” inflation will rise to 2% target. Economic data were mixed: US flash PMI reading for services rose to four month high while the Manufacturing PMI dropped to eight month low. Today at 13:00 CET Mortgage Applications will be released in America. At 15:00 CET House Price Index for March by Federal Housing Finance Agency will be published, the outlook is negative for dollar. At 16:00 CET April Existing Home Sales will be released the outlook is negative. And at 18:00 CET Fed's May meeting minutes will be published.

Data point to continued euro-zone expansion

European stock indices rebounded on Tuesday as euro-zone economic activity remained at a six-year high. Both the euro and British Pound weakened against the dollar. The Stoxx Europe 600 rose 0.2%. Germany’s DAX 30 gained 0.3% closing at 12659.15. France’s CAC 40 outperformed adding 0.5% while UK’s FTSE 100 ended 0.2% lower at 7485.29.

Market sentiment was boosted as Markit euro-zone Composite PMI held at six-year high in May, at 56.8. Data for Germany and France were positive too: German flash Manufacturing PMI at 59.4 was better than expected and a 73-month high though services activity was at three month low. A reading above 50 indicates expansion. A preliminary reading of French Services PMI at 58.0 also was better than expected and a 72-month high though services activity was at two month low. But travel related stocks slipped after a suicide bomber attack in Manchester, England which killed 22 people and injured 59. Today German GfK consumer confidence survey results for June were released, pointing to improvement in consumer sentiment in June. At 14:45 CET ECB president Draghi will speak in Madrid.

GB 100

Moody's downgrades China's credit ratings

Asian stock indices are higher today as Chinese stocks pared earlier losses after Moody's Investors Service downgraded China's credit ratings on Wednesday for the first time in nearly 30 years. Moody’s said it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise. It downgraded one notch long-term local and foreign currency issuer ratings, to A1 from Aa3. China's Finance Ministry said the downgrade overestimated the risks to the economy and was based on "inappropriate methodology". The Shanghai Composite Index is up 0.1% while Hong Kong’s Hang Seng Index is down 0.1%. Nikkei rose 0.7% to 19742.98 as yen slide against the dollar continued. Australia’s All Ordinaries Index added 0.1% in a choppy trade. Australian dollar eased against the greenback.

Oil up ahead of inventory data

Oil futures prices are edging higher today on expectations the Organization of the Petroleum Exporting Countries (OPEC) will decide to extend production cuts for at least another six months tomorrow. July Brent crude closed 0.5% higher at $54.15 a barrel on London’s ICE Futures exchange on Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories. S&P Global Platts analyst polls indicate a decline of 2.8 million barrels.