Originally published by Rivkin Securities
US equity markets continue their push to new all-time highs on Tuesday, with three key equity benchmarks hitting new records. The Dow Jones Industrial Average gained +0.58% to trade at 20,743 while both the S&P 500 and Nasdaq 100 shown on the first chart below gained +0.60% and +0.49% respectively. The S&P500 saw broad buying with 405/505 securities advancing and all sectors in positive territory for the session. The US dollar strengthened against major peers following speeches by Federal Reserve Presidents which helped boost the probability of a hike in March to 22.1% from 17.7% previously. The dollar gained +0.59% against the euro, +0.4% against the yen, +0.09% against the Australian dollar and +0.17% over spot gold.
Federal Reserve Bank of Minneapolis President Neel Kashakari said in a speech that there was “more room to run” referring to the labour market leaning more on the dovish side. Philadelphia Fed President Patrick Harker however was more hawkish on Tuesday, saying that he continued to see three hikes of 25 basis point as appropriate for 2017. Harker also painted a fairly positive assessment for the US economy noting that it was “more or less back to normal”.
Overnight we will see the release of the FOMC minutes from the February 1st meeting where interest rates were left on hold. On Tuesday Markit released the composite flash PMI (MoM Feb) which declined from 55.8 to 54.3. The preliminary report suggests that February saw a dip in new business output, orders, hiring and inflationary pressures also faded. Still by Markit’s estimates the report is consistent with the economy growing at 2.5% in the first quarter. The report also estimates that 165,000 jobs were added in February, although we won’t find out the official number until March 10th.
In Europe equity benchmarks closed higher for the session, led by gains in the Euro Stoxx 600 +0.64%, DAX +1.18% and CAC40 +0.49%. A further flash PMI composite for the Eurozone highlighting further positive signs for the Eurozone, with a reading of 56.0 against estimates to remain unchanged at 54.4. The reading is the highest since April 2011 and implies GDP growth of 0.6% for the first quarter and overall paints of a positive picture for the continuing stabilisation witnessed for the Eurozone in 2016.
Locally today we will have an idea of the wage growth with the wage price index (QoQ & YoY Q4) due to be released at 11:30am Sydney time with forecasts to remain stable at +1.9% year-on-year. The S&P/ASX 200 finished relatively flat on Tuesday, down -0.07% although we can expect to follow the positive lead from Wall Street overnight with ASX SPI200 futures up +31 points.
Data releases:
· Australian Westpac Leading Index (MoM Jan) 10:30am AEDT
· Australian Wage Cost Index (QoQ & YoY Q4)11:30am AEDT
· German IFO – Business Surveys (MoM Feb) 8:00pm AEDT
· U.K. GDP – Preliminary (QoQ & YoY Q4) 8:30pm AEDT
· Euro-zone CPI (MoM & YoY Jan) 9:00pm AEDT
· U.S. Existing Home Sales (MoM Jan) 2:00am AEDT
· Fed’s Powell Speaks 5:00am AEDT
· U.S. FOMC Minutes From Feb 1st 6:00am AEDT
Chart 1 – S&P500 (Blue) & Nasdaq100 (Purple)
Chart 2 – U.S. Dollar Index Futures
Source: Rivkin, RivkinTrader