UK election, ECB meeting and Comeys Senate testimony in focus - 8.6.2017

US stocks snap two day losing streak

US stocks advanced on Wednesday with gains in financial sector offsetting the drop in energy shares. The dollar inched higher: 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, closed up 0.16% at 96.691. The S&P 500 rose 0.2% settling at 2433.14, led by financial stocks up 0.8% as energy shares dropped 1.5%. Eight out of 11 main sectors ended higher. The Dow Jones industrial average added 0.2% to 21173.69, led by Nike and UnitedHealth Group shares. Nasdaq advanced 0.4% to 6297.38.

Investors are unwilling to make big bets ahead of three major events scheduled today: former FBI director Comey’s testimony on alleged Russian interference in the 2016 US presidential election, the UK parliament election and the European Central Bank meeting. A day ahead of his Senate hearing Comey released the full text of prepared testimony, where he made no allegations connecting President Trump directly to Russia. In economic news the $8.2 billion rise in total consumer credit in April was below expectations, pointing to smaller expected increase in spending in second quarter than hoped. Today at 14:30 CET initial jobless claims and unemployment claims will be released in US, the tentative outlook is neutral. At 16:30 CET natural gas storage change will be released by Energy Information Administration.

European shares slide as investors await UK election, ECB meeting

European stock indices ended slightly lower on Wednesday as losses in energy shares outweighed gains in bank and utility stocks ahead of Thursday’s trio of important events: UK election, the ECB meeting and FBI’s ex-director Comey’s testimony. The euro fell while the British Pound gained against the dollar. The Stoxx Europe 600 index slid 0.1%. Germany’s DAX 30 slipped 0.1% to 12672.49. France’s CAC 40 closed 0.1% lower and UK’s FTSE 100 index fell 0.6% to 7478.62 on higher Pound and falling oil prices.

The euro weakened against major rivals on Wednesday after Bloomberg reported that the ECB will cut its inflation forecast through 2019 at its Thursday meeting. Analysts expected a slightly more hawkish stance from the ECB at this meeting hinting at coming tapering of asset purchase program as recent data were positive. However after the report the inflation outlook will be downgraded it is not likely a change in accommodative stance of the central bank can be expected. As to UK election, opinion polls mostly indicate a victory for Conservative Party and Prime Minister May but the lead over the opposition Labor Party is relatively small, in single digits, making the victory far from a certainty. An unexpected result could cause a shock in financial markets. In economic news, German factory orders fell 2.1% on month in April, steeper than a 0.3% expected decline. On the positive note, German industrial production rose in April more than expected. Today at 11:00 CET euro-zone final Q1 GDP will be released. The tentative outlook is neutral for euro. And at 13:45 CET European Central Bank interest rate decision will be announced. No change in policy is expected.

Asian stocks rise in cautious trade

Asian stock indices are mostly up today ahead of global events. Nikkei ended 0.4% lower at 19909.26 as the Q1 GDP was revised downward from initial estimate and the dollar resumed its slide against the yen on a report that the Bank of Japan was considering how to communicate its eventual exit strategy from its monetary stimulus. Chinese stocks are up after data showed Chinese exports in May were up 8.7% from a year earlier, more than expected: Shanghai Composite Index is 0.1% higher and Hong Kong’s Hang Seng Index is up 0.3%. Australia’s All Ordinaries Index is 0.1% higher as the Australian dollar still edges higher against the US dollar.

HK 50

Oil edges higher after steep losses on surprise US inventory build

Oil futures prices are recovering today after steep losses previous day following report US inventories rose for the first time in 10 weeks, deepening concerns that global supply glut endures. The Energy Information Administration report indicated US crude inventories rose by 3.3 million barrels last week instead of an expected decline of 3.5 million barrels. Stocks of crude oil and gasoline surprisingly rose as refinery runs declined and exports fell. August Brent crude fell 4.1% to $48.06 a barrel on Wednesday on London’s ICE Futures exchange.