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Markets Anticipate U.S. Interest Rate Hike

Published 11/20/2015, 07:39 AM
Updated 12/18/2019, 06:45 AM

US stocks ended slightly lower on Thursday with the major US indexes little changed. The trading volume on US exchanges was 6.5bn, which is below the 20 trading days average of 7.3bn. The US dollar weakened after a four-day winning streak with the US dollar index, a measure of the greenback’s value against the basket of six currencies, closing 0.7% lower having hit a 7-month axis a day before. Dow Jones industrial average was flat losing 0.01%. Nasdaq Composite edged 0.16% up. S&P 500 live data show the index closed 0.06% lower, with 6 out of 10 its sectors being in the black and utilities leading the growth (+0.97%), while healthcare and energy sectors were losing more than 1%. The insurer UnitedHealthGroup (N:UNH) revised down its profit forecast, which pushed its stocks 5.65% lower while the Tenet Healthcare (N:THC) stocks slumped 8%. Drugmaker Phizer lost 3.06%. Chesapeake Energy Corp (N:CHK) stocks plunged 10%, Southwestern Energy Co (N:SWN) was 7.2% down. On the other hand, Intel Corp (O:INTC) shares added 3.44% due to the increased annual dividend. Economic data showed yesterday the number of the unemployment applications contracted last week, which supports the case for the upcoming interest rate hike. On Thursday, futures traders estimated the chances of the December hike in 72%, up from 68% before the release of the Fed October meeting minutes. Today at 19:00 CET, the November rig count from Baker Hughes (N:BHI) will be released in the US. No other important economic news are expected today from the U.S.

European markets sky-rocketed on Thursday, touching 3-month highs in anticipation of the US interest rate hike. The EUR/USD pair climbed 0.7%. FTSEurofirst 300 index rose 0.4% as food and facilities group Sodexo (OTC:SDXOF) announced it was going to cut its costs to cope with volatility in the global markets and revised up its earnings outlook, which pushed its shares up by 9.9%. The UK’s FTSE index climbed 0.8%, Germany’s Dax 30 index added 1.1%. The mining sector was on the rise as weaker dollar made dollar-denominated metals cheaper for investors outside the US. The travel and leisure sector seems to have already played off the Paris terrorist attacks, adding 1.4% yesterday. Today at 11:00 Peter Praet, the chief economist at ECB, will speak in Frankfurt. Today at 16:00 CET, the consumer confidence will be released in Eurozone; the outlook is positive.

Nikkei index climbed 0.1% to 19,880 yesterday, 1.4% up this week. The JPY/USD currency pair slid to 122.82 on Thursday, having hit a 3-month high of Wednesday at 123.77. On Monday, the Japanese markets will be closed for a national holiday – Labour and Thanksgiving day.

Brent is rising today while WTI is hovering near its 3-month lows, having lost already 13% in November and around 60% since mid-2014. Brent futures for January are traded at $44.30, WTI futures are traded at $40.54. According to commodities analysts, stronger US dollar in view of the oncoming interest rate hike will make the dollar-denominated oil contracts more expensive, which may lead to the contracted demand for oil and thus to the worsening of the global supply glut.

Gold live chart indicates the metal is firming today, still being close to its 5-year low hit on Wednesday amid the strengthening U.S. dollar and the looming interest rate hike. Higher interest rates increase the opportunity costs of holding physical gold. Spot gold increased 0.4% to $1,086 an ounce. Other precious metals – silver, platinum and palladium, added from 0.4 to 0.8% an ounce.

Nickel prices hit the 12-year lows on the LME (London), falling 1.7% to $8,800 on China’s slowing growth and metal’s global supply glut.

Wheat, corn and soybeans edged higher on Thursday on export sales reports surpassing the market expectations. The crops also benefit from the wet weather in South America, rising supply prospects.

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