Wall Street at records ahead of July 4 holiday, European stocks also up
Wall Street’s mood Wednesday was aptly reflected in its bronze bull sculpture, shown here in 2013, as the Dow, S&P 500 and Nasdaq all ended at records (SPENCER PLATT)
New York (AFP) – The fireworks got started a bit early on Wall Street on Wednesday with all three major stock indices surging to records after a plethora of mediocre US economic data appeared to boost the odds of a Federal Reserve interest rate cut.
In a session shortened ahead of the Independence Day holiday, the Dow, S&P 500 and Nasdaq all jumped to records a day before celebrations are to be marked with fireworks around the United States. Such holiday sessions typically see lower trading volumes, which can magnify market moves.
The excitement in New York came on the heels of a buoyant session in Europe, where investors were cheered by the appointment of IMF chief Christine Lagarde to be the first female head of the European Central Bank.
The Wall Street records came as the yield on the 10-year US Treasury note sagged below two percent, the latest retreat in the wake of commentary from Fed Chair Jerome Powell and other policymakers that has opened the door to an interest rate cut as soon as this month.
Market expectations of a rate cut have grown in part due to weakening economic data that has been attributed in part to myriad trade conflicts.
Data on Wednesday showed US companies hired fewer employees than expected in June, while the US trade deficit hit a five-month high as imports from Mexico soared amid trade uncertainty.
US jobless claims fell modestly, while the crucial services sector expanded, but grew at the weakest pace in nearly two years as business activity, hiring and new orders all declined.
A key report will come Friday when the Labor Department releases estimates for June job growth. Analysts expect the US added 160,000 jobs and that unemployment held steady at 3.6 percent.
Briefing.com characterized Wednesday’s reports as “mostly disappointing,” while citing an expected Fed cut as the reason for the rally.
“While the market has been emboldened” by the prospects of lower interest rates, “it should be noted that historically speaking, the first rate cut has not been a positive event for equities going forward,” Briefing added.
– Dovish ECB too? –
Earlier, Frankfurt’s blue-chip DAX 30, London’s FTSE and the CAC 40 in Paris all rose by well over half a percent at the close, with Paris even setting a new high for 2019.
Analysts viewed the gains as similar to the US rally in that they were also fostered on expectations of dovish monetary policy.
“You have to look at Europe to understand today’s rally,” said Franklin Pichard, head of Kiplink Finance. “Will Christine Lagarde, who will take the helm at the ECB in the coming months, be a fan” of accommodative monetary policy, the expert asked.
For the markets, “it seems the answer will be yes.”
Lagarde, 63, has stepped down as head of the International Monetary Fund after being nominated to replace Mario Draghi at the ECB, a move central bank watchers believe will see a continuation of the special policy measures to stimulate economic activity in the single currency area.
“Lagarde is seen as maintaining an expansive approach to both conventional and unconventional monetary policies that will support the 19-member eurozone,” said OANDA analyst Edward Moya.
She “is not an economist, but she is a respected policymaker that has led the IMF through the aftermath of the financial crisis.”
Oil prices recovered somewhat Wednesday after data showed another drop in US crude stockpiles but the rebound made only a dent in the four-percent slump Tuesday triggered by weak demand growth worries.
The commodity has endured a volatile week, having surged Monday as Russia and Saudi Arabia agreed to prolong their output caps.
– Key figures around 1800 GMT –
New York – Dow: UP 0.7 percent at 26,966.00 (close)
New York – S&P 500: UP 0.8 percent at 2,995.82 (close)
New York – Nasdaq: UP 0.8 percent at 8,170.23 (close)
London – FTSE 100: UP 0.7 percent at 7,609.32 (close)
Paris – CAC 40: UP 0.8 percent at 5,618.81 (close)
Frankfurt – DAX 30: UP 0.7 percent at 12,616.24 (close)
EURO STOXX 50: UP 0.9 percent at 3,540.63 (close)
Tokyo – Nikkei 225: DOWN 0.5 percent at 21,638.16 (close)
Hong Kong – Hang Seng: DOWN 0.1 percent at 28,855.14 (close)
Shanghai – Composite: DOWN 0.9 percent at 3,015.26 (close)
Euro/dollar: DOWN at $1.1283 from $1.1289 at 2130 GMT
Dollar/yen: DOWN at 107.84 yen from 107.88
Pound/dollar: DOWN at $1.2576 from $1.2593
Brent North Sea crude: UP $1.42 at $63.82 per barrel
West Texas Intermediate: UP $1.09 at $57.34 per barrel
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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.