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Economic data boost rate hike expectations : 25.05.2016 by IFC Markets

US stock market rallied on Tuesday as strong housing market data reassured investors economic growth is accelerating. The dollar strengthened in light of data supporting rate hike expectations in coming months: live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, closed up 0.3% at 95.567. The Dow Jones Industrial Average added 1.2% settling at 17706.05 with all constituents ending higher except Boeing which slipped 0.06%. Microsoft was the blue chip index’s best performer, up 3.12%. The S&P 500 jumped 1.37% to 2076.06 with all ten main sectors finishing in positive territory. After several Fed officials expressed recently their support for a rate hike in June if incoming data remain strong the new home sales report indicated sales of single-family homes in April surged 16.6% to a more than eight-year high, signaling strong demand for housing. Banking shares advanced amid higher expectations of interest rate hike as banks are expected to gain from higher interest rates: JP Morgan rose 1.67%, Goldman Sachs added 1.31%.

Today at 13:00 CET Mortgage applications will be released by the Mortgage Bankers’ Associations in US. At 14:30 CET advance April Goods Trade Balance will be published. The tentative outlook is negative. At 15:00 CET March House Price Index will be released by Federal Housing Finance Agency. The tentative outlook is neutral. At 15:45 CET May Preliminary Service PMI will be released by Markit. The tentative outlook is positive. And at 20:00 CET Federal Reserve Bank of Dallas President Robert Kaplan will participate in a discussion at Greater Houston Partnership Thought Leader Series.

European stocks advanced on Tuesday led by banking shares. The euro weakened against the dollar declining to $1.1139 late Tuesday compared with $1.1215 late Monday in New York . The Stoxx Europe 600 rallied 2.2%. Bank stocks advanced as sentiment was bolstered on expectations of improved outlook for the second half of the year after UK’s June 23 referendum. Shares of Societe Generale and Barclays rallied 5.4% and 3.2% respectively. Germany’s DAX 30 index rose 2.2% to 10057.31 with weaker yen making products of export oriented companies more competitive. Carmaker Volkswagen jumped 4% and BMW gained 1.9%. Market participants discounted the lower than expected reading of ZEW Economic Sentiment in May which fell to 6.4 from 11.2 in April while a rise to 12 was expected. France’s CAC 40 index jumped 2.5% and UK’s FTSE 100 added 1.4%. Today at 10:00 CET May Ifo Business Climate, Current Assessment and Expectations Indexes will be released in Germany. The tentative outlook is positive.

Asian stocks are rising today as investor risk appetite improved after advances in US and European markets. Nikkei jumped 1.8% today to a near one-month high with exporter stocks advancing as weaker yen improved their profit outlook. Sony rallied 6.5% on better than expected earnings report.

Oil futures prices are edging toward $50 per barrel today with West Texas Intermediate (WTI) hitting a seven-month high at $49.45. Prices rose yesterday on expectations of lower US crude oil inventory due to recent supply disruptions in Canada and Africa. The American Petroleum Institute industry group report yesterday indicated US crude stocks fell by 5.1 million barrels to 536.8 million last week. July Brent crude rose 0.5% to $48.61 a barrel on London’s ICE Futures exchange yesterday. Energy Information Administration will release US Crude Oil Inventories at 16:30 CET today.

 

Source: http://www.ifcmarkets.com

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