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Markets: U.S. stocks advanced modestly on Wednesday with the third consecutive all-time high close. The Dow Jones Industrial Average gained 5.2 points, or 0.02%, to 22,646.87, while the S&P500 rallied 3.05 points, or 0.12%, to 2,537.63. ....

Mihir Kapadia, CEO and Founder of Sun Global Investments

 

“Markets: U.S. stocks advanced modestly on Wednesday with the third consecutive all-time high close. The Dow Jones Industrial Average gained 5.2 points, or 0.02%, to 22,646.87, while the S&P500 rallied 3.05 points, or 0.12%, to 2,537.63. 

Markets are responding positively to the better economic numbers, the prospect of large tax cuts and the receding of geopolitical tensions regarding North Korea.  If the strong economic numbers are sustained (and Friday’s US jobs number will be the next key piece of evidence no that) and the Trump Presidency delivers on Tax cuts, it is likely the equity markets will rise higher over the next few months.     

On the other hand, higher growth will lead to fears of greater inflation and tax cuts will lead to higher deficits and increased government borrowing. These factors combined with interest rate increases in 2017 and 2018 as monetary policy is normalised will be negative of US Treasuries and developed market bonds. The US 10yr closed unchanged at 2.33% and the US 2yr yield rose 0.01bps to 1.471%.

In overnight trading in Asia many key markets remain closed. Japan is open but struggled to make much progress despite a weaker yen. Most of the other markets in Asia which are open, are higher.

Spain continues to be a key highlight for the markets. Catalonia seems set on course towards declaring its secession from Spain after separatist parties requested the regional parliament convene on Monday to review the results of this week's independence vote. Spanish shares and bonds fell sharply yesterday. 

Fed Reserve:

The dollar is steady ahead of the September Jobs number. One key factor for the Dollar and monetary policy will be the next Fed chairman, and President Trump is expected to announce his nomination soon. Janet Yellen, Fed governor Jerome Powell and former Governor Kevin Warsh are all in contention for the job. The latter is much more of a hawk than Yellen. 

Commodities:

Oil prices are at a near 2-week low in Asian trading after losses in the U.S. time due to continued concerns of fuel demand easing while U.S. output edged higher. The price weakness comes despite upbeat data on oil storage level, with the EIA reporting crude stockpiles shrank by 6 million barrels last week more than the 300,000 barrel decline that had been expected.

Gold prices were slightly weaker in Asia as caution dominated ahead of Friday's U.S. jobs report. Gold has been under pressure as positive U.S. economic data that has fuelled expectations of another rate increase this year and a strong jobs report could add to the negative sentiment. The absence of Chinese buyers due to holidays and a weak Indian festival season demand are also negative factors.”

Source: AdvisorWorld.co.uk

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