Global Commentary
Asian markets followed Wall Street’s overnight lead on Wednesday, finishing basically flat across much of the region. Japan’s Nikkei saw weakness, mostly due to Japanese equities going ex-dividend on Tuesday. Chinese markets saw gains, which were especially good in Hong Kong, where a recovery in tech and property developers made the Hang Seng one of the best performing indices in the region. Asian investors are likely to begin looking ahead to the Chinese manufacturing PMI due early Friday.
European markets gained for the fifth consecutive session Wednesday, with banking shares leading the charge higher as investors baked in the increased probability of a December U.S. interest rate hike. Gains were broad based, as Spain also saw markets recovering as investor concerns over a Catalonian succession waned. Also helping equities across Europe was the continued slide in the Euro, which fell to a one-month low against the U.S. dollar. The Pound also slid lower against the U.S. dollar, helping lift British equities, and the FTSE closed higher for the first time in three sessions.
U.S. markets closed higher Wednesday as technology and the financials rallied, although most other sectors didn’t participate in the rally. Still, it sent the broader indices higher, especially the Nasdaq and Russell 2000, with the former gaining 1.2% and the latter gaining 1.9%. Risk appetite seems to be finding its way back into the markets and barring any geopolitical threats arising today or tomorrow we should see this rally extend to the weekend.
FOREX
EUR/USD
The pair fell for the third consecutive session as traders continue to price in the impact of the necessary coalition government in Germany, and the likelihood of the creation of the coalition to create turmoil for some time to come, as well as the potentially negative impact on the European Union as a whole. The drop was less severe than in the previous two sessions, and there is a very good chance the pair will find 1.1700 to be supportive.
GBP/USD
The pair fell for the fourth session in a row Wednesday, erasing all of the large gains made on September 17th, and retracing half of the two day rally that took the pair from 1.3200 to 1.3600. While the pair may find temporary support at this halfway mark, it looks as if traders are ready to retrace the entire move, so we are watching for the pair to continue dropping and test 1.3200 for support in the coming days.
Cryptocurrencies
Wednesday was a good day for cryptocurrencies as Bitcoin re-crossed $4,000 and was able to remain above that psychologically important handle. Buyers are slowly returning to the cryptocurrency markets, and we could see a run to new all-time-highs in the coming weeks if the digital currency space doesn’t stumble. By the end of the day Ethereum was also holding above $300, which is bullish for the space, and Litecoin was flirting with $55 as all three of the major coins gained roughly 6% on the day.
Commodities
Metals
Precious metals fell on Wednesday for a second consecutive session as risk appetite began returning to equity markets, and the U.S. dollar continued firming against rival currencies. Analysts see little sign of support for gold at this time, and it’s quite possible the yellow metal could see another $30 of downside before it does reach a level of support.
Oil
Crude erased early losses and finished higher on Wednesday after the U.S. Energy Information Agency surprised traders by reporting a 1.8 million barrel weekly drop in U.S. crude inventory levels. Markets had been expecting inventory levels to climb 1.3 million barrels. The drop came as U.S. refineries are back online following hurricane Harvey, and have been drawing more stocks than expected.
Indices
Dow Industrials
Gains from financial heavyweights Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM) helped lift the Dow to a new record closing high on Wednesday, but the best return on the session was from laggard General Electric (NYSE:GE). Gains for the day were broad based, with 22 of the 30 Dow components gaining for the session.
Dax
The German benchmark index made a solid move higher on Wednesday, gaining 0.41% as investors become more accustomed to the prospect for a long and drawn out negotiation to secure a coalition government. Also helping lift the index was a weaker Euro, and the prospect of the current German finance minister becoming the Parliamentary president in German chancellor Angela Merkel’s next administration.
Stocks
Anglo American (LON:AAL) PLC
After dropping off the resistance at the 1,400p level at the beginning of September shares of the miner may be ready to make another run at the resistance level, and could break through this time, supported by rising copper and iron ore prices. With platinum looking as if is ready to bounce off support at the $900 level Anglo American could get an even bigger boost, as it supplies roughly 40% of the world’s platinum. Watch for a breakout from the 1,400p level for a strong run higher.