Upbeat earnings and ECB dovish plan boost risk appetite - 27.10.2017

SP 500, Dow rise as House passes 2018 budget

US stocks retraced higher on Thursday buoyed by better than expected corporate reports and the House of Representative’s approval of the budget blueprint. The dollar surged after the European Central Bank announced it would reduce its monthly asset purchases from January while extending the program through at least September 2018: 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, jumped 1.1% to 94.629. Dow Jones industrial average rose 0.3% to 23400.86. The S&P 500 gained 0.1% to 2560.40. The Nasdaq composite index meanwhile lost 0.1% closing at 6556.77.

Treasury yields rose after dovish European Central Bank announcement it plans to extend the stimulus program while reducing monthly bond purchases. The House of Representatives narrowly passed the $4 trillion budget blueprint for 2018 which opens the door for the Senate to later pass President Trump's tax cuts proposal with a simple majority instead of 60 votes. Economic news were mixed: weekly jobless claims were at a historical low level despite rising by 10000 to 233000. Advance goods trade balance declined by $64.1 billion in September, compared with a $64.0 billion expected deficit. Pending home sales were unchanged in September after 2.6% decline in the previous month, putting them at a 2.5-year low.

European stocks rally on dovish ECB plan

European stocks rallied on Thursday on ECB’s plans to reduce its monthly bond purchases by half to €30 billion starting in January but extend them to at least September 2018. Both the euro and British Pound resumed the slide against the dollar. The Stoxx Europe 600 index closed 1.1% higher. Germany’s DAX 30 jumped 1.4% to 13133.28. France’s CAC 40 outperformed rallying 1.5% and UK’s FTSE 100 rose 0.5% to 7486.50. Indices opened 0.1%-0.5% higher today.

ECB left interest rates unchanged stating it anticipated them to remain at current levels for an “extended period”. ECB’s plan for the bond purchases program was seen dovish as President Mario Draghi said the decision reflects an “open-ended” program that won’t stop suddenly. While the tapering of bond purchases was expected the plan opens the door for continuing the bond purchases if inflation stays low while unemployment remains high. Euro fell sharply despite reports Catalonia president Puigdemont would call early elections.

EU 50

Asian markets advance

Asian stock indices are mostly higher today with market sentiment buoyed by upbeat US earnings reports. Nikkei rose 1.2% to 21-year high 22008.54 as yen weakness against the dollar persisted. Chinese stocks are rising: the Shanghai Composite Index is 0.3% higher and Hong Kong’s Hang Seng Index is up 0.7%. Australia’s All Ordinaries Index is down 0.2% despite extended losses in Australian dollar against the greenback.

Oil edges lower

Oil futures prices are inching lower today. Prices rose yesterday on comments from Saudi Arabia’s Crown Prince backing the extension of OPEC-led output cuts deal beyond march 2018, when it is currently set to expire. Brent for December settlement rose 1.5% to end the session at $59.30 a barrel, 15-month high.