Global Commentary
Asian markets traded broadly higher Thursday, extending their own gains in response to the overnight strength from Wall Street. Investors are also getting geared up for earnings season, which is expected to be quite good. Japan’s Nikkei added to a 21-year high, and in South Korea the Kospi traded to a new record high. Gains in technology helped markets across the region, but energy shares were weak after data from the American Petroleum Industry showed U.S. inventory levels rose overnight.
European markets ended flat in directionless trade Thursday, with Germany’s DAX edging slightly higher to a new record closing high, while French and Spanish markets edged slightly lower. There was no economic data released to give markets a catalyst, and investors responded by simply keeping the status quo. London’s FTSE was the best performer in the region, hitting a new record high for the first time since May as it rose 0.3% on a weaker Pound.
U.S. markets dropped off their record levels Thursday as U.S. earnings season got into full swing with the banking sector leading the way. JPMorgan and Citigroup (NYSE:C) both reported earnings on Thursday, with both reporting stronger than expected revenues and profits, but falling anyway as the financial sector fell broadly. It wasn’t the great start expected for earnings season, so hopefully investor sentiment will improve in the coming days and weeks as earnings reports pick up steam.
FOREX
EUR/USD
The pair dropped Thursday, taking a breather after its strong run higher in the previous two sessions. There was no economic data out of Europe or the U.S., but today the U.S. will release key inflation and retail sales data, and it’s reasonable to thing that traders were simply evening up positions ahead of this data.
AUD/USD
The pair gained for the third consecutive session Thursday as traders continue to price in the decreased likelihood of a U.S. interest rate hike in December. The move took the pair back above the 0.7800 level, but the gains still may not stick as the U.S. will release key inflation and retail sales data today that could easily strengthen the U.S. dollar. Short-term the pair also remains in a downtrend and needs to get above the 0.7860 level to change that.
Cryptocurrencies
Bitcoin surprised most on Thursday by surging above the $5,000 level far earlier than was believed probably. The cryptocurrency traded up to the $5,360 level before pulling back slightly and then turning higher again late in the day, testing the $5,400 level. Litecoin surged higher as well, topping the 11% rise of Bitcoin with a 16% rise of its own, but Ethereum languished and ended the day little changed, but still above the $300 level.
Commodities
Metals
Precious metals gained on Thursday, with gold hitting a two-week high, but still unable to break above the key psychological $1,300 level. Palladium also continued its rally and is on track for its best weekly performance since early June. The gains came as traders see the latest Federal Reserve monetary policy as more dovish than was expected, but analysts see the $1,300 level as remaining extremely resistant for gold.
Oil
Crude prices fell on Thursday as the U.S. Energy Information Administration reported a third consecutive week of falling U.S. crude inventory levels, but also reported that global crude supplies increased, while global demand for crude softened. Some suggested that the weakness in demand was due to recent Gulf Coast hurricanes, and that demand would soon snap back.
Indices
Dow Industrials
The Dow Industrials came off record levels on Thursday as investor confidence fell, despite a good start to this quarter’s earnings season. Both Citigroup and JPMorgan reported better than expected results, but it did nothing to help the financial sector, which was broadly lower and weighed on the broader indices. The largest losses came from Goldman Sachs (NYSE:GS) and United Health after President Trump signed an executive order directing federal agencies to consider expanding health-insurance coverage in low-cost plans that aren’t subject to Affordable Care Act rules.
FTSE 100
London’s benchmark index rose to a new record closing high for the first time since May as it ended the session 0.3% higher. The catalyst for the move higher came from optimism that Prime Minister Theresa May has control of Parliament, and a weaker Pound on news that Brexit talks have reached a stalemate.
Stocks
JPMorgan Chase (NYSE:JPM)
The investment bank reported better than expected revenue and earnings for the third quarter on Thursday, but the stock still got punished with a 0.88% drop as trading revenue was weak due to the quiet nature of the markets over the past quarter. With the S&P 500 currently in its quietest period in two decades, which will likely turn into the quietest period ever, JPMorgan could continue to struggle with trading revenue. Certainly, investors could see it that way, and that could pull the stock off its current lofty heights, especially if the Fed refuses to raise interest rates in December.