While you were sleeping: Greenback hits commodities

Friday 13th November 2015

Wall Street dropped, along with European equities and commodities, amid concern about global economic growth as well as a potential Federal Reserve interest rate hike next month at a time the European Central Bank appears set to boost stimulus.

In New York trading at about 12:13pm, the Dow Jones industrial average dropped 1 percent. At about 11.58am trading, the Standard & Poor’s 500 Index fell 0.7 percent while the Nasdaq Composite Index slid 0.4 percent. The US dollar rose, buoyed by the prospect of a rate hike.

“Tighter policy expectations coming out of the Fed has led to a mini rally in the dollar and inflation expectations seem fairly well-anchored so additional pressure on commodities is not really a surprise,” David Lafferty, the chief market strategist for Natixis Global Asset Management in Boston, told Bloomberg. “The fact it’s all commodities seeing weakness tells you it’s a dollar and Fed-related story.”

Declines in shares of Caterpillar and those of Chevron and Exxon Mobil, last trading 2.8 percent, 2.5 percent, and 2.1 percent lower respectively, led the Dow lower.

Chevron and Exxon Mobil fell with the price of oil, after an Energy Information Administration report showed US crude inventories rose more than expected last week, while the Organisation of Petroleum Exporting Countries said global inventories were the highest in at least a decade.

"It's another data point highlighting the oil glut in the US or the global markets for that matter," Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, told Reuters.

A US Labor Department showed that initial claims for state unemployment benefits were steady at a seasonally adjusted 276,000 for the week ended November 7.

"The trend in claims remains quite low and continues to point to steady labour market improvement," Derek Lindsey, an analyst at BNP Paribas in New York, told Reuters.

There was good news too, such as solid earnings from Kohl’s, offering relief after rival Macy’s profit outlook downgrade the previous day. Shares of Kohl’s rallied, last up 6.7 percent.

“The results were very good,” Brian Yarbrough, an analyst at Edward Jones, told Bloomberg. “Kohl’s has a lot of initiatives and a lot of things they can do to turn around their business.”

Shares of Nordstrom, scheduled to report earnings after the close, last traded 1.6 percent higher. Shares of JC Penney, set to release results on Friday, last traded 4.1 percent stronger. Even shares of Macy’s got a lift after Wednesday’s slump, last trading 0.8 percent higher.

Shares of Cisco, set to report its latest earnings after the market close, last traded 0.6 percent higher.

In Europe, the Stoxx 600 Index finished the session with a 1.5 percent drop from the previous close. Germany’s DAX Index declined 1.2 percent, while France’s CAC 40 Index and the UK’s FTSE 100 Index each shed 1.9 percent.

Investors worried the European Central Bank’s willingness to add stimulus next month signals bad news about the economic outlook, underpinned by the latest comments from ECB President Mario Draghi.

“Downside risks stemming from global growth and trade are clearly visible,” Draghi told European lawmakers on Thursday.

A Eurostat report showed industrial production in the euro area declined a larger than expected 0.3 percent in September.

The euro overnight index average, or Eonia, rates dated for ECB meetings indicate an almost 100 percent chance of a cut in December, according to Bloomberg.

BusinessDesk.co.nz

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