US equities pull back ahead of inflation report - 13.3.2018

SP 500, Dow slip while Nasdaq rises

US stocks ended mostly lower Monday after Friday rally. The S&P 500 slipped 0.1% to 2783.02 led by industrial stocks down more than 1.2%. The Dow Jones industrial fell 0.6% to 25178.61. The Nasdaq composite index however rose 0.4% to 7588.32. The dollar weakened snapping three-session strengthening streak: 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, fell 0.2% to 89.92. Stock indices futures indicate higher openings today.

Stock valuations are still high after volatility increased sharply following the January upbeat jobs report which triggered broad market selloff. The February jobs report was strong too with 313,000 new jobs created, the biggest gain since mid-2016 with in the number of Americans joining the labor force also increasing. However the below expected 0.1% wage growth in February eased worries inflation might be accelerating which would compel the Federal Reserve to take a more aggressive approach to interest rate increases making equities less attractive as borrowing costs rise for companies. The inflation report due today at 13:30 CET will be closely watched with a surprise rise in core inflation, which excludes volatile food and energy prices, raising the likelihood of four rate hikes this year.

European stocks rise sixth session straight

European stocks rose on Monday as upbeat US nonfarm payroll report last Friday boosted investors risk appetite. The euro joined the British Pound’s climb against the dollar. The Stoxx Europe 600 index rose 0.3%, sixth consecutive win. The DAX 30 jumped 0.6% to 12418.39. France’s CAC 40 added less than 0.1% while UK’s FTSE 100 lost 0.1% to 7214.76. Indices opened flat to 0.3% higher today.

DAX got additional boost from German utility stocks after major energy producer RWE reached a deal with E. ON. RWE will take E. ON’s renewable power generation assets – Innogy, in a $27.1 billion bid. RWE shares jumped 9.2%, and E. ON rose 5.4%.

Asian stocks mixed

Asian stock indices are mixed today. Nikkei rose 2.3% to 21962 helped by resumed yen slide against the dollar. Chinese stocks are falling on news the country was planning to merge its banking and insurance regulators: the Shanghai Composite Index is down 0.5% and Hong Kong’s Hang Seng Index is 0.1% lower. Australia’s All Ordinaries Index is down 0.4% on lower iron ore prices and Australian dollar strength against the US dollar.

AU200

Brent up on rising US output

Brent futures prices are extending losses today on rising US crude output. Prices fell Monday after the Energy Information Administration report crude production from seven major US shale plays is expected to climb by 131,000 barrels a day in April to 6.954 million barrels a day. May Brent crude settled 0.8% lower at $64.95 a barrel on Monday.