Stocks pull back as risk appetite fades

August 3, 2016

US stocks and European Stocks closed lower on Tuesday as economic data failed to boost investor risk appetite. Oil futures and Gold prices are retreating today.

See the full market analysis by IFC Markets from here.

This article is originally referred from IFC Markets Market Overview

US stocks closed lower on Tuesday as economic data failed to boost investor risk appetite. The dollar weakened with euro’s rise to five-week high against the dollar: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, slipped 0.7% to 95.065. The Dow Jones industrial average fell 0.5% to 18313.77 led by Pfizer. The blue chip index declined for seven sessions in a row, the longest losing streak in about a year. The Nasdaq index dropped 0.9% to 5137.73, posting the first loss after five winning sessions. The S&P 500 lost 0.6% closing at 2157.03, led by consumer discretionary and industrial stocks.

The broad market index still closed in the 1% range that held for the last 17 sessions, indicating lack of convincing data which could bolster investor confidence and help breakout from the range. The personal consumption expenditure index, Federal Reserve’s preferred inflation gauge, rose 0.9% in June compared to the same month a year earlier. The gain was equal to previous month’s change. The core PCE index was also flat at 1.6%. US consumer spending in June rose 0.4% on month, also unchanged from previous month. The growth in personal income also was steady at 0.2%.

Next important economic data – July nonfarm payrolls will come out Friday. Today at 13:00 CET Mortgage Applications will be released in US. At 14:15 CET July employment change will be published by ADP, the tentative outlook is positive for dollar. And at 16:00 CET July ISM Non-Manufacturing PMI will be released, the tentative outlook is negative for dollar.

European stocks ended lower on Tuesday as bank shares fell. The euro strengthened against the dollar as expectations for a Federal Reserve rate hike were dialed back following weak US data. The Stoxx Europe 600 index fell 1.3%.

Italian banks were hardest hit as the Italian banking sector was highlighted as one of the weaker spots in Europe’s financial infrastructure based on bank stress test results. Banca Monte dei Paschi di Siena, which showed the worst result of 51 bank tests, sank 16%. Commerzbank AG shares tumbled 9.2% after the bank announced it won’t achieve its target of stable net profit for the full year. Deutsche Bank and Credit Suisse Group shares fell 4.8% and 6.2%, respectively, as the stocks are slated for deletion from the Euro Stoxx 50 on August 8.

Germany’s DAX 30 dropped 1.8% settling at 10144.34. France’s CAC 40 and UK’s FTSE 100 fell 1.8% and 0.7% respectively. Today at 10:30 CET final July Services and Composite PMIs will be released in UK. The tentative outlook is neutral for Pound. At 11:00 CET June retail sales will be released in euro-zone, the tentative outlook is negative for euro.

Asian stocks are extending losses today. Hong Kong’s Hang Seng Index is down 1.65% while Shanghai Composite Index inched 0.1% higher as the decline in Caixin services purchasing managers’ index to 51.7 in July from 52.7 in June indicated the growth in China’s services sector slowed and employment fell for first time in four months. Australia’s S&P ASX 200 is down 1.26%.

Nikkei ended 1.9% lower today as yen strengthened after the government’s ¥28 trillion stimulus package fell short of investors’ expectations with only about one quarter of stimulus planned for infrastructure spending.

Oil futures prices are retreating today after falling the previous day as global glut in crude oil and gasoline pressured prices lower. September West Texas Intermediate crude lost 1.4% to $39.51 a barrel on the New York Mercantile Exchange on Tuesday, settling below the $40 for the first time since April.

At 16:30 CET today US Crude Oil Inventories will be released by the Energy Information Administration. The late Tuesday report by the American Petroleum Institute, an industry trade group, indicated US crude oil inventories fell by 1.3 million barrels in the latest week.

Gold is inching higher today after spot gold hit $1367.33 on Tuesday, the highest price since July 11. The safe haven metal has been rising as expectations for a rate hike this year by Federal Reserve are getting revised downward after FOMC interest rate decision and recent weak economic data from US.

Original Source: IFC Markets Market Overview

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