Financial market review for january 09 2018

Financial Market Review for January 09 2018 In today’s trading session, Asian stocks extended their New Year rally Tuesday, though Japanese equities pared gains after the Bank of Japan trimmed the size of its bond-repurchase offer in its latest market operation.

The Nikkei, +0.57% advanced 1% in early trading as it caught up with regional gains after a market holiday on Monday. But shares pulled back after the central bank’s decision to cut the size of its offer for bonds maturing in 10 to 25 years by 5% to ¥190 billion ($1.7 billion) sent the yen higher. The index was recently up 0.7%.

Some saw the BOJ’s move as a sign of slight policy tightening.

In Hong Kong, the Hang Seng Index HSI, +0.46% topped 31000 for the first time since 2007, putting it 2% from a record closing high. It is also looking to match 1999’s record 11-day winning streak; there have been five 10-day runs since, including the current one.

Moving to the US equity market, The S&P 500 and the NASDAQ closed at records on Monday as gains in energy and industrials helped the benchmarks finish in positive territory in the first five sessions of 2018 on optimism over a stronger economy and looming fiscal stimulus.

The S&P 500 index SPX, +0.17% gained 4.56 points, or 0.2%, to 2,747.71 and the Nasdaq Composite Index COMP, +0.29% rose 20.83 points, or 0.3, to 7,157.39.

The Dow Jones Industrial Average DJIA, -0.05% bucked the trend to slip 12.87 points to 25,283.

Among the more active industries were utilities which rose 0.9% and technology, where a 0.4% rise supported the NASDAQ. Utilities are often viewed as defensive stocks which are more immune to economic cycles.

All three major U.S. equity benchmarks touched intraday records during the session after posting record gains on Friday, finishing the first week of the New Year with solid gains. Both the S&P 500 and the NASDAQ have ended at records in the first four sessions of the year, the first time the S&P has since 1964, according to WSJ Market Data Group.

A positive view for stocks that persisted in 2017 has continued in to early 2018, despite Monday’s muted action. The recently passed tax package is seen as a contributing factor, as are higher commodity prices and a run of solid economic data.

In the currency market, The Dollar gives up some of Monday’s gains in early trade as the BoJ shifts on policy. With data on the lighter side through the European and U.S session, the hawkish FOMC chatter will be fresh in the minds of the markets today.

Economic data released through the Asian session this morning included November building approvals out of Australia and the UK’s December BRC Retail Sales Monitor.

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Financial Market Review for January 09 2018 Building approvals surged by 11.7%, coming in well ahead of a forecasted 1.3% decline, following October’s downwardly revised 0.1% fall. The gains were largely attributed to the state of Victoria and a continued shift in living conditions away from private houses to apartments, with urbanization driving the housing sector.

The Aussie Dollar moved from $0.7844 to $0.78514 upon release of the figures, though the general outlook for the real estate sector continues to be on the softer side, following a tightening to credit conditions last year in a bid too cool down the sector.

For the early stat out of the UK, the retail sales indicator continued to baffle, with retail sales on a positive footing in spite of tepid wage growth, rising household debt and inflation rates sitting at above 3%. Due to the timing of the figures, the Pound showed little response to the figures, with the government’s retail sales figures of far greater influence.

While the stats were positive, the biggest news of the morning was the BoJ’s decision to reduce the size of its bond purchases for medium term maturities by 5% to ¥190bn. There had been talk of dissent in the last BoJ meeting and the latest move is the first sign of a possible shift in policy.

At the time of writing, the Yen was up 0.39% to ¥112.65 against the Dollar, with the gains coming off the back of the shift in policy, while the Aussie Dollar was up 0.18% to 0.7856, reversing much of Monday’s losses.

The euro languished on Tuesday after slipping from last week’s high as investors were cautious after a months-long rally.

The euro traded at $1.1968, having slipped 0.5 percent on Monday, its largest daily drop since late October.

Analysts said a correction was inevitable for the common currency after its rally over the past couple months to near its 2017 peak of $1.2092, thanks to signs of acceleration in the euro zone economy.

Speculators’ net long position in the euro/dollar futures in Chicago reached a record high last week, data from U.S. financial watchdog showed on Friday, pointing to potential for profit-taking.

While many Federal Reserve officials have said they expect three rate hikes this year, markets are not fully convinced as inflation remains tame despite very tight labor market conditions.

Indeed, Atlanta Fed President Raphael Bostic, a voter on interest rate policy this year, said on Monday that the Fed may only need to raise interest rates two times in 2018 given weak price pressures.

Such doubts have held the dollar index down near its lowest levels since 2015 during the past few months.

The index stood at 92.345 .DXY, after having fallen to 91.751 last week, not far from its 2-3/4-year low of 91.011 touched last September and way below its 2017 high of 102.26.

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Financial Market Review for January 09 2018 Finally in the commodity market, Oil prices rose on Tuesday, extending gains from a strong start to the week and on track for fresh three-year highs, as investors awaited an update on U.S. supply.

February West Texas Intermediate crude CLG8, +0.71% Â crude was recently up 44 cents, or 0.7%, at $62.16 a barrel, while March Brent LCOH8, +0.56% rose 36 cents, or 0.5%, to $68.14.

Gold prices continued to move in a sideways manner with the market not in any intention to move in any specific direction as yet. We are seeing the dollar becoming steady since the beginning of the week and though this has helped the dollar to gain against some currencies, it has not made much headway against the gold prices and other commodities as well. The gold market has held up much better than what was expected after the move higher on low volume during the end of December. This points to further gains in the gold prices though, again, fundamentally we do not believe that gold is as yet in a position to move even higher.

View our full economic calendar for a daily roundup of major economic events.

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