US MARKET WRAP: Dow breaches 23,000; USD sees further strength; UST 5s30s flattest since 2007

EQUITIES: US stocks were meandering around the unchanged mark for most of Tuesday’s session, although there was a great deal of attention on the Dow, which managed to breach the 23,000 handle for the first time.

Healthcare stocks were firm after a solid earnings report from United Health; additionally, US President Donald Trump signalled support for the Alexander/Murray bipartisan healthcare plan in the US Senate. Trump noted that the deal would be short-term, lasting for between one and two-years.

Despite decent earnings reports from Goldman Sachs and Morgan Stanley, and suggestions of a hawkish candidate leading the race for the Fed chair job, financials were on the back foot; Goldman was particularly hit, as it reported soft trading revenues.

S&P 500 +0.07% at 2,559.36; Dow Jones +0.17% at 22,996.82; Nasdaq-100 +0.13% at 6,122.61
Best-performing sectors: Healthcare +1.30%, Utilities +0.59%, Telecoms +0.24%
Worst-performing sectors: Financials -0.56%, Cons. Staples -0.36%, Industrials -0.27%

FOREX: The USD continued to strengthen on Tuesday, with traders focussing on Monday’s news that hawk John Taylor was among the front-runners for the position of Fed chair. US exports and imports data also helped at the margin.

There were comments from Fed officials, but they did little to alter the notion that the central bank would hike rates at its December meeting. John Williams, who votes in 2018, said that the FOMC should aim to lift rates in December and three additional times in 2018. The Fed’s Robert Kaplan (2017 voter) noted that progress on inflation would warrant another rate hike this year; he also reiterated his view that he wants to see more evidence that inflation would return to target in the medium-term. Patrick Harker (2017 voter), meanwhile, focussed on the labour market, arguing that there was little slack remaining.

The pound endured another rough session; BOE Governor Mark Carney, as well as the MPC’s new contingent – Deputy Dave Ramsden and Silvana Tenreyro – were before the Treasury Select Committee. While Carney didn’t reveal any new insight into a potential November rate hike, Ramsden stated he was not among those who believed that the Bank should necessarily hike in the coming months, saying he was taking a data-driven approach. Tenreyro was more neutral, though she warned that hiking prematurely could turn out to be a mistake.

The Canadian dollar and Mexican Peso strengthened – especially the latter – after NAFTA ministers were reportedly prepared to extend talks into 2018, with traders relieved after rumours circulating earlier in the session that both countries were prepared to reject US demands.

Finally, the latest GDT auction out of New Zealand showed a 1% decline in the headline index, against an expected rise between 2-4%, and whole milk powder prices were down by 0.5%; there was little by way of reaction in the Kiwi.

TREASURIES: Yields on two-year Treasuries rose to the highest since 2008 following US import and export data; five-year yields were also higher, though yields in the belly- and long-end of the curve fell slightly. Accordingly, the 2s10s spread fell to the lowest since August 2016, while the 5s30s curve narrowed to the lowest since 2007.

US 10-Year T-Note Futures settled just half a tick higher at 125-14.

ENERGY: Crude prices gave back early gains, with the Kurdistan-related bid being unwound as Iraqi authorities took control over facilities in the region. Traders also seem happy to look through the Iran/US tensions given that EU would abide by the nuclear deal even though the US has disavowed it, and additionally Russia would be unlikely to follow the US.

Traders will also be keeping an eye on energy inventory data released by the API after the bell today. The consensus view looks for crude stocks to draw by 4.8mln barrels, while distillates and gasoline are seen drawing by 1.5mln and 1mln barrels respectively.

WTI crude futures settle at $51.88 per barrel, up $0.01; Brent futures settle $0.06 higher at $57.88 per barrel.

METALS: Gold prices continued to ease, dragged down by yesterday’s news that hawk John Taylor was among the front-runners for the Fed chair role. The yellow metal fell as low as $1,281, though pared back some of the losses to settle at $1,286.

 

17 Oct 2017 - 21:00- Research Sheet- Source: Newswires

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