by Eli Wright
Though US markets closed higher yesterday, this morning the dollar fell and global stocks are mostly down as markets await Fed Chair Janet Yellen's two-day Congressional testimony which begins later this morning. The dollar's decline may also be a result of the resignation of US National Security Advisor Michael Flynn, after it became clear that he'd lied about discussions he'd had with Russia's ambassador to the US prior to President Trump's inauguration. Flynn held the position for less than a month.
Yellen is expected to answer questions about her confidence in the US and global economies; if and when there will be additional interest rate hikes; normalizing the Fed balance sheet; and the possible impact of deregulation and other fiscal policy proposals. Her tone and level of forthrightness could influence the direction markets will take in the coming days.
Separately, UK headline CPI came in lower than expected, at 1.8% vs 1.9% eyed, which is currently having a negative affect on the sterling. It's down 0.50% to 1.2462 at time of writing.
Overnight in Asia, the Nikkei fell 1.13%, to 19,238.98, driven in part by the melt-down in Toshiba's (T:6502) stock price after the company delayed Tuesday's earnings release because it was revealed that improprieties within its nuclear unit would result in a $6.3 billion write-down.
The Hang Seng closed flat at 23,710; and the Shanghai Composite edged 0.05% higher, to 3,218.38, buoyed by better-than-expected China CPI, which came in at 2.5% YoY versus the expected 2.4% and much stronger PPI, 6.9% vs the expected 6.3%.
In Europe, the FTSE is up 0.16% at 7,291. However the DAX has ticked 0.07% lower, to 11,768.50; and the Stoxx 50 has declined 0.12%, to 3,305.
On Wall Street yesterday, indices notched fresh all-time highs. The Dow closed 0.7% higher, at 20,412.16; while the S&P and NASDAQ each rose 0.52%, to 2,328.25 and 5,763.96, respectively. The Russell 2000 also closed at a record high, up 0.34% to 1,392.53.
In pre-market trading, the Dow, S&P, and NASDAQ are all lower by approximately 0.06%.
US Treasury yields are higher across the board: the 2-year yield is 1.206%; the 10-year yield is 2.438%; and the 30-year yield is 3.037%.
Forex
The Dollar Index is currently down 0.09% at 100.87, having slipped from yesterday’s intraday high of 100.96. To the upside, the greenback could rise to 101.5-102. However, downside support could be tested at 99.48.
The euro is currently 0.15% higher against the greenback, despite disappointing German Q4 GDP numbers. There was a 1.2% YoY increase instead of the expected 1.7%.
Yesterday the European Commission upgraded its EU forecast for 2017. It should be noted, however, that their press release cited “higher-than-usual uncertainty” and “exceptional risks” including “the numerous elections to be held in Europe this year and the upcoming ‘Article 50’ negotiations with the UK.”
The Swiss franc is up 0.11% after January CPI was flat, better than the -0.1% expected and January PPI rose 0.4%, up from last month's 0.2%. However, the Swissy could see some big swings ahead in either direction; USD/CHF could push to 1.0187 or fall to around 0.9789.
The Canadian dollar is 0.19% higher, trading at $1.3047 after Prime Minister Justin Trudeau's meeting yesterday with the US President. After the meeting Mr. Trump said he only wanted to tweak NAFTA’s Canada provisions, “to benefit both of our countries.”
President Trump also used the opportunity to take some jabs, yet again, at Mexico, reiterating that the trade agreement is not fair to the United States, which has a $58B trade deficit with Mexico compared to the $11B trade surplus it has with Canada.
The Mexican peso was not affected by Trump's latest remarks. It's up 0.2%, at 0.0494.
Commodities
Yesterday, OPEC announced a 93% member compliance rate with the promised production cuts. However, the EIA followed up by saying they envision US shale production rising by 79,000 bpd by March. After falling 2% yesterday, crude oil has rebounded 0.47% to $53.18.
Oil’s nearest support can be found at $52.54, while to the upside, prices could rise to $54.23.
Natural gas is down to a 12-week low, at $2.917, as weather forecasts continue calling for warmer-than-usual temperatures across significant portions of the US. NatGas is down nearly one percent already today, having fallen more than seven percent over the past four sessions. Support could be tested at $2.610; to the upside, the nearest resistance is at $3.14.
Precious metals edged higher this morning. Gold is up 0.29% at $1,229.25, while silver is up 0.35% at $17.883. Base metals are also looking bullish.
Stocks
Among the companies reporting earnings today before the market opens:
- T-Mobile (NASDAQ:TMUS) is expected to report Q4 2016 earnings per share of $0.29 on $9.85 billion in revenue.
- Dr Pepper Snapple Group (NYSE:DPS) is set to report Q 2016 EPS of $1.06 on revenue of $1.58 billion.
- Molson Coors Brewing Company (NYSE:TAP) is scheduled to announce Q4 2016 earnings of $0.85 per share on $2.63 billion in revenue.
After the market closes: