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Top 5 Things to Know in the Market on Friday

EconomyDec 01, 2017 06:08AM ET
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5 key factors for the markets on Friday - Here are the top five things you need to know in financial markets on Friday, December 1:

1. Dollar under pressure as tax reform hits snag

The dollar registered choppy trade around the unchanged mark, wavering between gains and losses, as it attempted to break what would be a string of three-day declines after the U.S. Senate suspended voting on the tax reform bill until later on Friday as conversations to win a majority vote broke down.

Stocks did react positively to news that Senator John McCain offered support for the legislation, with U.S. Treasury yields hitting five-week highs, but caution appeared to reign on Friday as market participants awaited the rubber stamp.

Markets have been following progress on tax reform closely with several major companies, such as Cisco Systems (NASDAQ:CSCO), Coca Cola or Pfizer (NYSE:PFE), having stated that the benefits of the corporate tax reduction will be passed on to shareholders. Economists are skeptical that the changes will have a major impact on the economy.

At 6:00AM ET (11:00GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, inched up 0.06% at 93.03.

2. Eyes on Fedspeak and manufacturing activity

Apart from progress on tax reform, investors in the dollar will be keeping a close eye on the continuing flow of remarks from Federal Reserve policymakers.

St. Louis Fed president James Bullard will be speaking on monetary policy and the U.S. economy at 9:05AM ET (14:05GMT) Friday.

Dallas Fed chief Robert Kaplan will participate in a Q&A in a symposium at 9:30AM ET (14:30GMT). On Thursday, Kaplan expressed his view that the Fed should move forward on the next rate hike in the "near future" given the positive conditions in the labor market.

Philadelphia Fed president Patrick Harker will discuss “inclusive economic growth” on Friday at a forum at 10:15AM ET (15:15GMT).

Also on Friday’s economic calendar, the ISM manufacturing purchasing managers’ index (PMI) for November and October construction spending will be released at 10:00AM ET (15:00GMT).

3. Caution holds global stocks at bay

Global stocks were mostly lower on Friday with U.S. futures pointing to a lower open. After the S&P closed at a record high and the Dow broke above the 24,000 mark for the first time on Thursday, investors switched to a cautious stance while waiting for the U.S. Senate to move ahead on tax reform. At 6:02AM ET (10:02GMT), the blue-chip Dow futures fell by 98 points, or 0.40%,

S&P 500 futures lost 15 points, or 0.56%, while the Nasdaq 100 futures traded down 55 points, or 0.87%.

Elsewhere, Europe's financial stocks wilted after a delayed vote on tax reform in the U.S. deflated a rally in the sector, also driving regional benchmarks to start December on the back foot. Both the benchmark Euro Stoxx 50 and Germany’s DAX were off more than 1% by 6:04AM ET (10:04GMT), though London’s FTSE 100 showed lesser losses of around 0.4%.

Earlier, Asian stocks moved to intraday highs after Wall Street's strong close, only to pare gains into the close as caution over the U.S. tax reform settled in.

4. Oil continues longest monthly winning streak since 2016

Oil prices started December off with solid gains on Friday, following up on a streak of three straight monthly gains, its longest since early 2016.

The bullish trend continued after the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members led by Russia followed market expectations and agreed to extend their supply cuts from March 2018 through to the end of next year.

Oil has risen around 17% since the last time producers gathered for an official meeting back in late May with major oil producers not scheduled for another round of negotiations until June.

Saudi energy minister Khalid al-Falih said inventories were expected to decline to the desired targets in the second half of 2018, although he admitted that production from other areas, such as U.S. shale output, remained an unknown.

In that light, market participants will keep an eye on Baker Hughes most recent weekly rig count data to be released later on Friday.

At 6:05AM ET (10:05GMT), U.S. crude oil futures gained 0.66% to $57.78, while Brent oil traded up 0.83% to $63.18.

5. European manufacturing activity soars to 17-year high

Ahead of the U.S. ISM manufacturing PMIs, Euro zone production lines grew at their fastest rate in 17 years in November. Led by Germany, the headline index for the euro area hit 60.1 last month, the second highest level on record after April 2000.

The reading for the UK also showed the strongest growth in four years in November. The British manufacturing PMI rose to 58.2 last month, beating expectations for a reading of 56.5 and bolstering optimism over the UK economy.

Top 5 Things to Know in the Market on Friday

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