Investors refrain from big bets as geopolitical tensions rise - 11.4.2017

US indices edge higher as oil rises

US stock indices closed marginally higher on Monday led by energy stocks as investors were cautious to make big bets ahead of earnings season. The dollar inched lower pulling back after a rally following rising geopolitical tensions as US struck a Syrian air base : 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, edged lower 0.1% to 101.014. The Dow Jones average rose 1.92 points to 20658.02 paring earlier losses, led by Caterpillar and Traverels shares. S&P 500 ended up 1.62 points to 2357.16 with energy and real estate stocks leading the advancers, up 0.8% and 0.7% respectively. The Nasdaq composite index added 3.11 points to 5880.93.

Stocks inched higher as investors await the start of earnings season this week. Investors expect higher profits with FactSet estimating first-quarter earnings could rise as much as 12%. The stock market rally which started since presidential elections on expectations of stimulus measures pledged by president Trump has stalled after the president failed to secure Congress’ support for his healthcare law, his first legislative initiative. Higher earnings will confirm economy is accelerating and boost market sentiment. Federal Reserve chair Janet Yellen said on Monday the central bank plans to raise US interest rates gradually, aiming to sustain full employment and near 2% inflation without letting the economy overheat. And St. Louis Fed President James Bullard said the Federal Reserve could start unwinding its balance sheet later this year, which would make it less necessary to raise interest rates. Today at 12:00 CET March Small Business Optimism Index will be released in US. The tentative outlook is positive for the dollar. At 16:00 CET Job Openings and Labor Turnover Survey results will be published, the outlook is negative for dollar. At 19:45 CET Minnesota Federal Reserve president Kashkari will speak in Minneapolis, Minnesota.

SP 500

French stocks fall on political uncertainty

European stocks closed fractionally lower on Monday near 16 month highs as investor confidence was undermined by geopolitical tensions following the US missile strike against Syria last Friday after a suspected chemical weapons attack that killed civilians. Both the euro and British Pound strengthened against the dollar. The Stoxx Europe 600 index fell less than 0.1%. The DAX 30 lost 0.2% to close at 12200.52. France’s CAC 40 lost 0.5% lower and UK’s FTSE 100 slipped less than 0.1% settling at 7348.94.

French stocks underperformed after Sunday polls showed Socialist candidate Jean-Luc Melenchon overtook center right conservative candidate Francois Fillon for the first time with 18% of support from respondents compared with Fillon’s 17%. The spread between French and German 10-year bond yields started to rise on the news. The first round of voting in the French presidential election will be held on April 23. Today at 10:30 CET March inflation will be released in UK, the outlook is neutral for the Pound. And at 11:00 CET April ZEW survey results for Germany and euro-zone and industrial production for February will come out. The tentative outlook is positive for euro.

Asian markets mixed

Asian stock indices are mixed today amid growing geopolitical tensions after President Trump ordered US missile strike on a Syrian air base and sent US Navy strike group toward the western Pacific Ocean near the Korean peninsula. Nikkei dropped 0.3% to 18747.87, with yen extending gains against the dollar on back of stronger haven demand and hurting exporter stocks. Chinese stocks are higher with the Shanghai Composite Index 0.6% higher while Hong Kong’s Hang Seng Index is 0.7% lower. Australia’s All Ordinaries Index ended 0.3% higher after National Australia Bank Business Confidence index hit the highest level in a decade with the Australian dollar extended gains against the dollar.

Oil prices lower

Oil futures prices are pulling back today as rising US shale oil production offset concerns over geopolitical tensions in the Middle East. Prices rose the previous day as Libya's Sharara oilfield was shut on Sunday after a group blocked a pipeline linking it to an oil terminal, supporting the rally that started last week. May Brent crude closed 1.3% higher at $55.98 a barrel on Monday on London’s ICE Futures exchange.