With US markets closed for thanksgiving holiday focus is on Europe
A tech shares bounce moved European equities higher on Thursday following similar moves in US and Asia. Strong data in the US yesterday, which is combined with elevated inflation could translate into faster tapering by the Fed. With US markets closed for Thanksgiving, focus will be on Europe today, where a surge in COVID-19 cases is raising prospects of lockdowns going to Christmas holiday season. Emerging markets have calmed down after a turbulent few day with Turkish Lira losing its value, Russia and Ukraine tension rising and Mexico Central Bank uncertainty.
US stocks finished mostly higher with S&P 500 increasing 0.2% to 4,701, Nasdaq gaining 0.4% to 15,845 and Dow Jones declining 9 points to 25, 804. The deluge of economic data was headlined by a drop in initial jobless claims, better-than-expected personal income and spending, and a mixed read on durable goods. The minutes from November FOMC offered insights into Fed’s worries about inflation and discussion around the pace of its announced taper policy. In corporate earnings Gap and Nordstrom struggled after both missed profit projections. The labour market continued to show progress toward the Fed’s maximum employment goal as jobless claims fell to the lowest level since 1969. However, this is most probably a seasonal adjustment one off. Treasuries are mixed. As the yield on the 2-year note rose 3bpps to 0.64%, the yield on the 10-eay note decreased 3 bps to 1.64. 30-year bond dipped 7 bps to 1.96%. Dollar edged lower today with DXY trading 0.1% lower at 96.73, consolidating after hitting 16-month highs after the last Fed’ s meeting minutes pointed to the potential of a faster tapering pace. US calendar will be dormant for the remainder of the week with US markets closed today for a Thanksgiving holiday.
European stock markets have been trading higher this morning with DAX up 0.3%, CAC 40 rising 0.3% and UK FTSE 100 climbing 0.1%. In Germany, the Social Democrats, the Greens and the Free Democrats have finally agreed a coalition deal on Wednesday, that will allow Olaf Scholz of Social Democrats to become a German Chancellor after Merkel’s departure. Europe is facing a wave of new restrictions in the wake of rising Covid 19 cases with Italy announcing new restrictions on Wednesday. Netherlands and France are expected to reveal new measures on Friday. Austria introduced a national lockdown at the start of this week. German GDP grew 1.7% quarter-on quarter in the third quarter, lower than 1.8% expected. EURUSD rose 0.2% to 1.1218 after falling below 1.12 on Wednesday.
Asian tech stocks traded higher today with Japan’s Nikkei rising 0.8%, helped by gains in Sony, which rose 1.5%, while Hong Kong tech index gained 0.85% versus 0.25% rise in the local benchmark. Alibaba was up 2.7% and was among the leaders. The move followed advances in the US tech stocks. The Bank of Korea raised its policy interest rate by 25 bps on Thursday, as widely expected, as concerns over rising household debt and inflation offset uncertainty around resurgence in COVID-19 cases.
Oil prices edged lower with Brent Crude slipping 7 cents to $82.18 a barrel and WTI losing 19 cents to $78.20 a barrel. Investors are waiting to see how major produces respond to the emergency crude release by major consuming countries, which was aimed at cooling the market. All eyes are on the OPEC Countries, Russia and allies, who are due to meet next week to discuss oil demand and supply.