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US Stocks Surged To New Record, Dollar Soft

Published 12/08/2016, 03:32 AM
Updated 03/09/2019, 08:30 AM
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US equities surged to new record highs overnight as the Trump rally continued. DJIA gained 297.84 pts, or 1.55%, to close at 19549.62. S&P 500 jumped 29.12 pts, or 1.32% to close at 2241.35. Both indices closed at new records. The recently troubled NASDAQ lagged behind a bit but still managed to close at 5393.76, up 60.76 pts or 1.14%, just below prior record close at 5395.92. Positive sentiments carried through to the Asian session with major indices trading higher. Meanwhile, treasury yields extended recent consolidation with 30 year yield down -0.053 but closed above 3.0 handle at 3.029. 10 year yield also dropped -0.049 to close at 2.347. Dollar index also stays soft and is back pressing 100 handle as recent consolidations continue. Dollar and bond traders are getting more cautious head of next week's FOMC meeting. While a rate hike is fully priced in, markets will look into update projections, in particular the so called "dot plot". Currently fed fund futures pricing in close to 50% chance of another rate hike by June and such expectations would change based on the Fed projections.

Focus will now turn to ECB meeting first as policy markets are expected to decide on what to do after the current EUR 80b a month asset purchase program expires in March. Majority of market participants expect a six month of extension. But there seems to be no consensus of when would ECB start exiting the unconventional measures. That is, it's uncertain when ECB could start tapering the asset purchase. Traders would be keen to look into ECB president Mario Draghi's hints on that. Euro could be given a lift if Draghi does try to pave the way for exiting stimulus ahead. Meanwhile, ECB will also publish new staff economic projections, including a first outlook for 2019.

Elsewhere, Japan Q3 GDP growth was finalized at 0.3% qoq, below expectation of 0.6% qoq. GDP deflator dropped -0.2% yoy, worse than expectation of -0.1% yoy. Current account surplus rose to JPY 1.93T in October. China trade surplus narrowed to USD 44.6b in November, or CNY 298b. Australia trade deficit widened to AUD -1.54b in October. UK RICS house price balance rose to 30 in November. US will release jobless claims later today. Canada will release housing data and capacity utilization.

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