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Equities rebound on Canada, Mexico exemption - 9.3.2018

Nasdaq logs fifth straight gain

US stock indices recovered on Thursday as President Trump signed orders to impose import tariffs on steel and aluminum but exempted Canada and Mexico. Dow Jones industrial average advanced 0.4% to 24895.21. The S&P 500 rose 0.5% to 2738.97. The Nasdaq composite added 0.4% to 7427.95. The dollar accelerated strengthening: 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, rose 0.6% to 90.099. Stock indices futures indicate mixed openings today.

Market sentiment was buoyed by tariff exemption granted to Canada and Mexico while they renegotiate the North American Free Trade Agreement with US. The tariffs of 25% on imported steel and 10% on aluminum will go into effect on March 23, and Trump also decreed that tariffs can be modified for certain countries such as Australia, which he referred to as a “long-term partner.” Another positive development was the news Trump accepted invitation to meet North Korean leader Kim Jong Un.

Euro slides as 2019 inflation forecast downgraded

European stocks ended at one-week high on Thursday as euro retreated from three-week high. British Pound joined euro’s slide against the dollar. The Stoxx Europe 600 index climbed 1.1%. Germany’s DAX 30 rose 0.9% to 12355.57. France’s CAC 40 jumped 1.3% and UK’s FTSE 100 added 0.6% to 7203.24. Indices opened 0.1% - 0.2% lower today.

The euro retreated as European Central Bank President Mario Draghi emphasized more dovish elements of the bank’s monetary policy statement, including a commitment to maintaining rates at present and low levels if needed. The ECB reiterated that the current €30 billion a month stimulus program will “run until the end of September 2018, or beyond, if necessary.” It also slightly reduced its 2019 inflation forecast to 1.7% from 1.9%. These dovish developments overshadowed the hawkish omission from the statement of the pledge to expand or extend quantitative easing if the economic outlook deteriorated, and the upgrade of euro-zone 2018 growth forecast to 2.4% from 2.3%. The ECB left its refinancing rate at 0%. In economic data German manufacturing orders fell more than expected in January, dropping 3.9%, compared with forecasts of a 1.5% decline. And the Bank of France said the country’s economy is likely to expand by 0.4% in the first quarter, down from 0.6% in the fourth quarter of 2017.

Hang Seng still paces Asian indices

Asian stock indices are extending gains today on news North Korean leader Kim Jong Un and President Donald Trump agreed to meet by May. Nikkei rose 0.5% to 21469.50 as yen accelerated its slide against the dollar with the Bank of Japan keeping rates unchanged and giving no hint of future plans. Chinese stocks are extending gains as China's consumer inflation hit 4-year high: the Shanghai Composite Index is 0.6% higher and Hong Kong’s Hang Seng Index is up 1%. Australia’s All Ordinaries Index is 0.3% higher despite Australian dollar turning higher against the greenback.

AU200

Brent lower on rising US output

Brent futures prices are extending losses. Prices fell yesterday on continued gains in US crude production. The Energy Information Administration on Wednesday reported that US crude production continued to climb to a fresh weekly record - up 86,000 barrels in the last week to 10.369 million barrels a day. Brent for May settlement fell 1.1% to close at $63.61 a barrel on Thursday.

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