Financial Markets Summary 21 May 2018

European cash equity markets are mostly higher at the closing bell with the Stoxx 600 hitting its best level since late January (FTSE +1.1%, CAC +0.5%, FTSE MIB -1.7%).  US cash equity markets are higher at the closing bell, led by industrial and real-estate (DJIA +1.1%, S&P +0.7%, NASDAQ +0.5%).

European Closing Report

We also saw a positive open on Wall Street as fears of a global trade war eased somewhat over the weekend with the US and China committing to doing their part. Italian stocks have slumped however as looming political uncertainty pushed government bond yields higher. 

Rating agency Fitch warned this afternoon that the incoming government increases risks to the country’s sovereign credit profile. Elsewhere in fixed, US borrowing costs have inched higher with little data to dictate otherwise this afternoon – Chicago Fed National Activity Index rose to 0.34 from 0.32. In currency space, the Dollar Index rose above 94 to a new year-to-date high earlier today but has since pulled back somewhat. Sterling has struggled amid reports of possible UK snap elections in the Autumn.

We heard from US Treasury Secretary Mnuchin who said Trump could consider a skinny NAFTA overhaul that would not require congressional approval. He did also warn there are still some very significant, open issues. Minneapolis Fed President Kashkari said the Fed should not move too fast to raise rates. Still to come today, possible comments from Fed President’s Bostic and Harker.


US Closing Report

Investors have welcomed an easing of trade tensions between the US and China over the weekend as both sides took steps to appease the other. In the bond markets, US yields are little changed on the day having paused their recent run higher while the Dollar Index is set to long only a minor gain having eased back from an earlier run above 94.0. 

We did hear from Atlanta Fed President Bostic said he would prefer to raise rates two more times this year. Philly Fed President Harker offered a similar view but added that he could potentially support an additional hike if inflation accelerates. He did later add there is no rush to move rates up. Elsewhere, US crude futures settled at $72.24 (+$0.96).

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Financial Markets Summary 22 May 2018

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