US MARKET WRAP: USD higher as tax reform hopes stokes risk sentiment; more record highs for stocks

EQUITIES: Fresh record highs as stocks rode the risk-on wave on Friday after US Senators passed budget measures late on Thursday that clears the way for tax reform. Tech, industrials and financials were leading gains, while the defensive consumer staples, utilities and telecoms sectors underperformed.

In terms of individual names, a decent earnings report from PayPal propelled its shares towards the top of the leaderboard. It is worth noting that GE went green in afternoon trade despite dropping as much as 9% pre-market on an earnings miss and disappointing guidance.

Analysts were taking comfort from the fact that, of the 88 companies that have reported in the S&P 500 so far in Q3 earnings seasons, 70% had beaten expectations.

S&P 500 +0.50% at 2,574, Dow Jones +0.71% at 23,327, Nasdaq-100 +0.27% at 6,109
Best-performing sectors: Financials +1.15%, Industrials +1.07%, Materials +0.86%
Worst-performing sectors: Cons. Staples -0.20%, Utilities -0.13%, Healthcare +0.11%

TREASURIES: The Treasury curve bear-steepened on Friday after Senators late Thursday cleared budget measures that pave the way for lawmakers to work on tax reform. Additionally, it was reported that Trump’s announcement on the Fed chair role will be announced “soon”. The latest batch of headlines had little sustained impact either way: In an interview to be aired with Fox News on Sunday and Monday, US President Trump is reported to have said both Jerome Powell and John Taylor are the leading candidates for Fed chair; however, he also said that Yellen was also being considered. US 10-Year T-Note Futures settled 14 ticks lower at 124-26+.

FOREX: The Dollar was also higher, with the DXY up by around half a percent, largely taking its cue from news from Capitol Hill, although late in the day, was volatile near session highs after another batch of headlines suggested that the Fed chair race was between John Taylor (considered hawkish) and current Fed Governor Jerome Powell; it is worth adding that Trump was said to have told Fox News that current Chair Janet Yellen was still in the running, which did see the USD ease a touch.

Haven demand was deflated on the risk-on tioone, with the Yen and Swissy falling by around 0.90% against the buck. Yen traders are focussing on the Japanese elections over the weekend, where current PM Shinzo Abe’s coalition is seen falling slightly short of a supermajority.

Gold is around 2% lower in the week, with losses accelerating on Friday after Senators cleared budget measures that pave the way for lawmakers to work on tax reform.

Sterling was stronger against the dollar and euro, however, after progress was said to have been made in Brexit talks; Euro area leaders confirmed that they would commence preparations to move negotiations on to the second phase, allowing the possibility for trade talks to begin. It was noted, however, that progress was still needed.

The Canadian Dollar softened after disappointing retail sales and CPI data reduced the chances of a BOC hike next week. 

ENERGY: Oil settled higher on Friday, spurred by risk-on sentiment. The Baker Hughes rig count was lower for the third straight week, whileflows from Kirkuk to Ceyhan were still lower at 200k. WTI futures settled 18 cents higher at $41.47 per barrel, while Brent settled 52 cents higher at $57.75 per barrel.   

20 Oct 2017 - 21:02- Forex- Source: RANsquawk

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