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Top 5 Things to Know in the Market on Wednesday

EconomyFeb 07, 2018 06:13AM ET
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© Reuters. 5 key factors for the markets on Wednesday - Here are the top five things you need to know in financial markets on Wednesday, February 7:

1. Wall Street back to doldrums after brief respite

A volatile week in markets looked set to continue on Wednesday as U.S. futures pointed to a lower open on Wall Street, coming on the back of a strong recovery a day earlier. At 6:10AM ET (11:10GMT), the blue-chip Dow futures tumbled 225 points, or 0.90%, S&P 500 futures fell 26 points, or 0.97%, while the Nasdaq 100 futures traded down 59 points, or 0.89%.

Even as volatility calmed on Tuesday, the negative reading of U.S. futures was accompanied by another rise in the CBOE Volatility Index as traders looked to protect against drops in the S&P 500.

European shares broke a seven-day losing streak on Wednesday as investors took heart from a strong bounce on Wall Street at the end of a rollercoaster session. However, most major European benchmarks were eyeing the drop in U.S. futures with caution, paring gains in midday trade.

Earlier, Asian stocks underwent a similar pattern, suggesting traders’ nerves will still on edge after Monday’s huge drop when the Dow notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year.

2. Bond yields, dollar steady ahead of Fedspeak

Recent moves in the bond market have been a hot topic to explain the waves caused in equities. Rising bond yields can crimp demand for assets perceived as riskier, such as stocks, particularly when those yields are higher than those of equities.

However, bond yields were relatively stable in early trading on Wednesday. The U.S. 10-year Treasury yield traded near the unchanged mark at 2.764% by 6:11AM ET (11:11GMT), down from a four-year high of 2.885% set on Monday.

Meanwhile, the dollar turned higher against major rivals in early trade on Wednesday, recovering from earlier losses and on track to register its fourth straight session of gains amid equity market volatility.

With no major economic reports on Wednesday’s calendar, investors will face on appearances from Federal Reserve policymakers. NY Fed chief William Dudley, Chicago Fed president Charles Evans and SF Fed chief John Williams are scheduled to speak throughout the day.

Earlier, Dallas Fed president Robert Kaplan suggested that the recent selloff in stocks was "healthy" and that he didn't believe it would have economic implications.

3. Oil prices head lower ahead of inventories

Oil prices were under pressure in some volatile trade on Wednesday as investors weighed U.S. inventory data ahead of official figures later in the session.

The American Petroleum Institute (API) reported late Tuesday that U.S. crude inventories fell by 1.1 million barrels in the week to February 2.

Official government data will be released at 10:30AM (15:30GMT) Wednesday, amid expectations for a build of roughly 3.2 million barrels.

U.S. crude oil futures lost 0.36% to $63.16 at 6:11AM ET (11:11GMT), while Brent oil fell 0.16% to $66.75.

4. Cryptocurrencies bounce back between 20% and 20%

The price of digital currency bitcoin bounced higher on Wednesday, building on gains from the previous day when it recovered from a drop to its lowest levels in more than two months amid a broad based selloff of digital assets.

Bitcoin jumped 25.73% to $8,197.30 by 6:12AM ET (11:12GMT) on the Bitfinex exchange.

Even with the price recovery, bitcoin remains down around 23% for February.

Analysts explained that the upward move across cryptocurrencies found its roots in the fact that testimony from regulators before the Senate Banking Committee a day earlier was not as negative as many investors had feared.

The bullish tendency extended to all cryptocurrencies with the likes of rivals Ethereum, Ripple, Bitcoin Cash or Cardano all registering gains between 20% and 30%.

5. German government coalition deal reportedly made

European investors took heart in reports that German politicians had reached a deal to form a coalition government on Wednesday.

According to several media reports, the center-left Social Democrats (SPD) reached an agreement over the distribution of ministries with ruling Chancellor Angela Merkel’s conservatives (CDU/CSU).

Several German media reports said that SPD’s Olaf Scholz was to become German finance minister while the party would also control justice, family and environment ministries.

The reports suggest an end to tumultuous negotiations since the elections last September as markets fretted over the country’s political fate. Germany is considered the motor of the euro zone economy.

Top 5 Things to Know in the Market on Wednesday

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