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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 02 March 2017 at 8:01 GMT

Morning Markets: Dow pushes over 21,000 on rate-hike hopes

Consultant editor
Denmark

forex

 

Watchlist

  • Eurozone: Unemployment (1000 GMT)

  • Eurozone: Consumer Price Index (1000 GMT)

  • US: Initial Jobless Claims (1330 GMT) 

A little over a month after it closed above 20,000 for the first time, the Dow slipped above 21,000 overnight. The index is reflecting renewed confidence in the US on the back of a March rate hike looking increasingly likely and the dollar rebounding to more than 114 yen after about a week sulking around 112.

Meanwhile, European indices that got a boost from US president Donald Trump’s speech on Tuesday night appear to be stagnating.

The refusal of scandal-mired presidential hopeful Francois Fillon to pull out of the French presidential race despite prosecutors opening a formal investigation against him on Wednesday will have done nothing to repair confidence on a continent wracked with fear that populist anti-EU candidate Marine Le Pen is in with a shot of winning, albeit a slim one.

Across the Channel, UK prime minister Theresa May got a disappointment on Wednesday after the House of Lords bounced the Article 50 bill back to parliament’s lower chamber. May had been hoping the Lords would simply rubber stamp the bill in order to stick to her timetable of formally commencing divorce proceedings with the EU no later than March 31. Amid this renewed uncertainty the pound continues its downward slide against the dollar this morning.

Gold recovered a little overnight, having lost almost $12/oz over Tuesday night. Elsewhere in commodities, WTI and Brent crude oil are both still struggling in their ranges, opening down today for the second consecutive day.


Market signals

Asian session

  • Asian markets opened sharply higher, tracking US gains, particularly in financial stocks
  • The ASX200 closed up 1.3% to 5777, on the way recording its best session for 2017
  • The Nikkei 225 surged 1% plus, helped by the weaker yen
  • Japan's monetary base rose 21.4% on year in February, less than the 23.2% expected
  • Hong Kong's Hang Seng made strong gains, led by financials and insurers
  • Beijing has ordered cuts in steel, aluminium production in northern China to curb pollution
  • Aluminium producers including ASX-listed South32 soared on the news
  • China is shifting away from coal; its coal consumption fell 4.7% in 2016
  • The gradual shift to other forms of energy will help Beijing tackle pollution
  • Australia posted a trade surplus of $A1.3bn, well below expectations of $A3.8bn
  • Australia's building approvals rose 1.8% in January, better than the predicted fall of 0.5%

Forex ahead

  • The US dollar rose against the yen; it was worth ¥114.09 at 0630 GMT
  • USD strengthened against the yuan; it was worth 6.88 yuan at 0630 GMT
  • The Aussie dollar slipped about two-tenths of a cent to 0.7648 on the trade data news
  • Relative commodity price moves will be the main factor in AUDNZD in coming months

From the Floor

Weaker Bunds. “Higher CPI and overall stronger numbers sends a lot of weakness, in particular Bunds,” — Boye

Hike ahead. “A March rate hike is really what the markets are pricing in now,” — Hansen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
The Eurozone's flash CPI estimate for February is expected to inch up to a four-year high of 2%, writes James Picerno

Hard approach
The FOMC will be taking a look at the “hard” economic numbers when they gather on March 14-15, rather than the “soft” data emanating from confidence surveys, explains Max McKegg.

Wake-up call
Gold investors are waking up to the reality of an increasing probability that borrowing costs in the US could rise this month, says Sydney's Saxo trading team.

Snap judgement
Snapchat's parent company has its IPO today. Social media are notoriously unpredictable, but clues to its fate can be found in Twitter and Facebook, writes Trading Floor's Jack Davies.


nnn
 Steelmaking in Wenzhou, China ... Beijing's steel and aluminium output curbs could send prices for the commodities soaring in Asia's leading economy. Photo: Shutterstock

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3y
Jim Earls Jim Earls
So increasing their rates is a positive for the equity markets?

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