MARKET ANALYSIS: Futures Pointing To Continued Strength On Wall Street

WASHINGTON (Alliance News) - The major US index futures are pointing to a modestly higher opening ...

Alliance News 14 September, 2018 | 2:00PM
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WASHINGTON (Alliance News) - The major US index futures are pointing to a modestly higher opening on Friday, with stocks likely to add to the gains posted in the previous session.

Continued optimism about trade may contribute to strength on Wall Street after reports earlier this week of another round of talks between the US and China.

The markets may also benefit from tame inflation data, with a report from the Labor Department showing a much bigger than expected drop in import prices in the month of August.

Following the lackluster performance seen on Wednesday, stocks moved mostly higher during trading on Thursday. The major averages all climbed into positive territory after ending Wednesday's trading mixed.

The Dow climbed 147.07 points or 0.6% to 26,145.99, the Nasdaq advanced 59.48 points or 0.8% to 8,013.71 and the S&P 500 rose 15.26 points or 0.5% to 2,904.18.

The strength on Wall Street partly reflected optimism about trade following recent reports the US is proposing a new round of trade talks with China in the near future.

US Treasury Secretary Steven Mnuchin has reportedly sent an invitation for talks to senior Chinese officials, proposing a meeting in the next few weeks.

Traders also reacted positively to a report from the Labor Department showing consumer prices rose by less than expected in the month of August.

The Labor Department said its consumer price index rose by 0.2% in August, matching the increase seen in July. Economists had expected prices to climb by 0.3%.

Excluding food and energy prices, core consumer prices inched up by 0.1% in August after rising by 0.2% for three straight months. Core prices had been expected to show another 0.2% increase.

The report also said the annual rate of consumer price growth slowed to 2.7% in August from 2.9% in July.

Core consumer prices were up by 2.2% year-over-year in August compared to the 2.4% increase in the previous month.

"There is no reason to suspect that the weaker increase in consumer prices in August is the start of another dip like we saw in early 2017," said Paul Ashworth, Chief US Economist at Capital Economics.

He added, "With labor market conditions tight, wage growth accelerating and input prices being pushed up by capacity constraints and recently imposed tariffs, there is plenty of upward pressure on prices."

A separate report from the Labor Department unexpectedly showed a slight drop in initial jobless claims in the week ended September 8th.

The report said initial jobless claims dipped to 204,000, a decrease of 1,000 from the previous week's revised level of 205,000.

Economists had expected jobless claims to rise to 210,000 from the 203,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 202,000 in December of 1969.

Telecom stocks showed a significant move to the upside on the day, driving the NYSE Arca Telecom Index up by 2.6%. With the jump, the index reached its best closing level in four years.

Considerable strength was also visible among semiconductor stocks, as reflected by the 1.2% gain posted by the Philadelphia Semiconductor Index.

Healthcare and utilities stocks also turned in strong performances on the day, while tobacco and banking stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are rising USD0.23 to USD68.82 a barrel after plunging USD1.78 to USD68.59 a barrel on Thursday. Meanwhile, after slipping USD2.70 to USD1,208.20 an ounce in the previous session, gold futures are inching up USD0.10 to USD1,208.30 an ounce.

On the currency front, the US dollar is trading at 112.01 yen compared to the 111.92 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at USD1.1680 compared to yesterday's USD1.1690.

Asia

Asian stocks ended broadly higher on Friday after reports that the US and China might hold a fresh round of trade talks, a development that could help resolve the trade dispute between the world's two largest economies.

Concerns around emerging market risks also eased somewhat after Turkey's central bank raised its key interest rate sharply in a dramatic bid to control rocketing inflation and prevent a currency crisis.

Chinese stocks fluctuated before closing lower after the release of mixed economic readings. The benchmark Shanghai Composite Index dipped 4.94 points or 0.2% to 2,681.64, while Hong Kong's Hang Seng Index jumped 271.92 points or 1% to 27,286.41.

Chinese industrial output and retail sales figures for August topped forecasts, but real estate investment cooled and growth in fixed asset investment dipped to a historic low, raising risks to China's economic outlook as the trade conflict with the US escalates.

Japanese shares rallied to hit their highest level in more than seven months as the yen dipped on expectations of a new round of US-China trade talks in the coming days and easing concerns about the state of emerging markets.

The Nikkei 225 Index surged up 273.35 points or 1.2% to 23,094.67, while the broader Topix Index closed 1.1% higher at 1,728.61.

Fuji Electric, Mitsui OSK Lines, Showa Denko KK, Alps Electric, Fuji Film and Yaskawa Electric jumped 4-8%. Chip-related stocks also surged, with Advantest, Tokyo Electron and Sumco soaring 5-6%.

Australian shares finished notably higher as investors lapped up beaten down stocks after a recent string of heavy losses since the beginning of this month.

The benchmark S&P/ASX 200 Index climbed 36.60 points or 0.6% to 6,165.30, while the broader All Ordinaries Index ended up 36.40 points or 0.6% at 6,276.30.

Higher iron ore prices helped lift miners, with heavyweights BHP Billiton and Rio Tinto ending up 1.6% and 1.2%, respectively.

The big four banks rose between 0.2% and 0.7%. In the healthcare sector, CSL rallied 2.1% and Cochlear added 1.5%.

Resmed Inc. jumped 2.2% after introducing its first minimal-contact full face CPAP mask.

Europe

European stocks have risen on Friday as media reports suggesting the possibility of another round of talks between the US and China helped ease market worries over the escalating tariff war that threatens to derail global economic growth.

While the UK's FTSE 100 Index has edged up by 0.2%, the French CAC 40 Index and the German DAX Index are both up by 0.3%.

Technology stocks have surged after Apple led a rebound in technology shares on Wall Street overnight. Automakers are also broadly higher as trade war concerns ease.

Close Brothers Group has rallied after the merchant banking group unveiled plans to sell Close Brothers Retail Finance to Swedish payment solutions group Klarna Bank AB for an undisclosed amount.

SThree, a specialist STEM staffing business, has also jumped after its third-quarter group gross profit increased 13% from last year.

Irish low-cost airline Ryanair has advanced after it reached agreement with Italian unions on outline terms of a Collective Labour Agreement.

Meanwhile, homebuilder Taylor Wimpey and rival Barratt Developments have fallen after Bank of England Governor Mark Carney warned of sharp house price falls in the event of a chaotic no-deal Brexit.

In economic news, the euro area trade surplus declined to the lowest level in four years in July, figures from Eurostat showed.

The trade surplus fell to a seasonally adjusted 12.76 billion euros from 16.47 billion euros in June. This was the lowest since June 2014, when the surplus totaled 12.22 billion euros.

US Economic Reports

Partly reflecting a drop in sales by motor vehicle and parts dealers, the Commerce Department released a report showing retail sales in the US increased by much less than expected in the month of August.

The Commerce Department said retail sales inched up by 0.1% in August after climbing by an upwardly revised 0.7% in July.

Economists had expected retail sales to rise by 0.4% compared to the 0.5% increase originally reported for the previous month.

Excluding the decrease in auto sales, retail sales rose by 0.3% in August after jumping by an upwardly revised 0.9% in July.

Ex-auto sales had been expected to climb by 0.5% compared to the 0.6% growth originally reported for the previous month.

A separate report released by the Labor Department showed import prices in the US fell by much more than expected in the month of August.

The Labor Department said import prices dropped by 0.6% in August after edging down by a revised 0.1% in July.

Economists had expected import prices to dip by 0.2% compared to the unchanged reading originally reported for the previous month.

The report also said export prices slipped by 0.1% in August after falling by 0.5% in July. Export prices had been expected to come in unchanged.

At 9 am ET, Chicago Federal Reserve President Charles Evans is due to speak about current economic conditions and monetary policy at the Northeast Indiana Regional Economic Forum in Fort Wayne, Indiana.

The Federal Reserve is scheduled to release its report on industrial production in the month of August at 9:15 am ET. Production is expected to rise by 0.3% in August after inching up by 0.1% in July.

At 10 am ET, the Commerce Department is due to release its report on business inventories in the month of July. Economists expect business inventories to climb by 0.6%.

The University of Michigan is also scheduled to release its preliminary report on consumer sentiment in the month of September at 10 am ET. The continuer sentiment index is expected to inch up to 96.6 in September from 96.2 in August.

Copyright RTT News/dpa-AFX

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