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While you were sleeping: Caterpillar beats estimates, euro climbs

Friday 26th January 2018

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Wall Street climbed, lifting the Dow to a record, amid optimism about the outlook for corporate earnings including those of Caterpillar, while the euro rose to a three-year high amid an upbeat economic assessment of the European Central Bank.

In 1.15pm trading in New York, the Dow Jones Industrial Average climbed 0.6 percent, while the Nasdaq Composite Index rose 0.2 percent. In 1pm trading, the Standard & Poor’s 500 Index gained 0.2 percent.

Earlier in the session the Dow touched a record high.

“Headlines have a short-term impact on equity prices, but the longer-term primary trend is what you want to invest with,” Jeffrey Saut, chief investment strategist at Raymond James, told Bloomberg. “And the primary trend with the equity markets is higher. So unless you get a nuclear event or something like that, I just don’t see what derails this. It’s like all the stars have aligned.”

The Dow advanced as gains in shares of 3M and those of Boeing, recently up 2.5 percent and 2.1 percent respectively, outweighed declines in shares of Apple and those of Home Depot, recently down 1 percent and 0.7 percent respectively.

Shares of Caterpillar rose, trading 1 percent higher as of 12.12pm in New York, after the company posted quarterly results that exceeded analysts’ expectations while its 2018 guidance also bettered forecasts, bolstering optimism about the global economic outlook.

“After four challenging years, many key markets improved in 2017, and our global team delivered strong results,” Caterpillar CEO Jim Umpleby said in a statement.

Caterpillar is beginning 2018 with strong sales momentum, the company said, adding that there are “positive economic indicators across most of the world and in many of the company’s end markets.” 

Analysts shared the company’s upbeat outlook.

“Caterpillar’s results showed strength across the board in nearly every industry for the first time, which indicated coordinated and synchronised macroeconomic growth,” Larry De Maria, an analyst at William Blair & Co, told Bloomberg. “It’s a good harbinger for overall economic activity.”

The company expects 2018 profit per share in a range of US$7.75 to US$8.75, it said. Excluding restructuring costs of about US$400 million, adjusted profit per share is expected in a range of US$8.25 to US$9.25, Caterpillar said. 
In Europe, the Stoxx 600 Index finished the session with a 0.6 percent decline from the previous close. France’s CAC40 Index fell 0.3 percent, the UK’s FTSE 100 index slid 0.4 percent, while Germany’s DAX Index dropped 0.9 percent.

The euro strengthened to the highest level in three years as European Central Bank President Mario Draghi pointed to the region's "robust pace of economic expansion, which accelerated more than expected in the second half of 2017."

"The strong cyclical momentum, the ongoing reduction of economic slack and increasing capacity utilisation strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2 percent," Draghi told reporters in Frankfurt after a Governing Council meeting. 

"At the same time, domestic price pressures remain muted overall and have yet to show convincing signs of a sustained upward trend," Draghi said. "Against this background, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability."


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