While you were sleeping: Rate hikes ahead

Thursday 29th June 2017

Wall Street advanced amid fresh economic optimism after central bank chiefs in the UK and Canada signalled interest rates increases ahead.

“Some removal of monetary stimulus is likely to become necessary if the trade-off facing the [Monetary Policy Committee] continues to lessen and the policy decision accordingly becomes more conventional,” Bank of England Governor Mark Carney told the ECB Forum on Central Banking in Sintra, Portugal.

A day earlier Federal Reserve Chair Janet Yellen's comments did little to alter expectations that the US central bank is on track for a third rate hike this year, while a speech by European Central Bank President Mario Draghi was interpreted as freshly hawkish.

Wall Street gained. In 3.19pm trading in New York, the Dow Jones Industrial Average climbed 0.7 percent, while the Nasdaq Composite Index rallied 1.4 percent. In 3.04pm trading, the Standard & Poor’s 500 Index advanced 0.9 percent.

“The market is very sensitive to the idea that a number of central banks are appropriately and belatedly reassessing the need for emergency policy accommodation,” Alan Ruskin, co-head of foreign exchange research at Deutsche Bank, told Bloomberg.

The Dow moved higher as gains in shares of Caterpillar and those of JPMorgan Chase, recently up 2.2 percent and 2 percent respectively, outweighed slides in shares of Johnson & Johnson and those of General Electric, recently down 1 percent and 0.3 percent respectively.

"The market has had trouble really appreciating, but it has had even more trouble declining," Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey, told Reuters. "It seems like any negative period is very quickly met with new buyers."

"Interest rates are still very low and a lot of investors see little opportunity to invest anywhere but in stocks," according to Meckler.

The latest corporate earnings also offered support. Shares of Monsanto rose, trading 1.1 percent higher as of 2.12pm in New York, after the company that’s being bought by Germany’s Bayer reported quarterly earnings that beat expectations, bolstered by continued momentum in soybean technologies.

“In soybeans, Monsanto has seen strong demand for the latest technologies, with growth of approximately 30 percent in global gross profit now expected for fiscal year 2017,” the company said in a statement.

Monsanto upgraded its full-year gross profit outlook for its seed and genomics unit.

"There was a lot of acreage that rotated out of corn and into soy and Monsanto was set up really well for that since they had some product launches in soy this year," Matt Arnold, an analyst with Edward Jones, told Reuters.

Shares of General Mills also gained, trading 1.9 percent higher as of 3.15pm in New York, after the maker of cereal reported quarterly profit that bettered expectations.

In Europe, the Stoxx 600 Index ended the session at 385.82, little changed from the previous close, and reversing a decline of as much as 1 percent earlier in the day.

Draghi’s speech at the ECB Forum in Sintra, Portugal, on Tuesday was intended to strike a balance between recognising the currency bloc’s economic strength and warning that monetary support is still needed, Bloomberg reported, citing three Eurosystem officials familiar with policy makers' thinking. The officials spoke separately and asked not to be named as internal discussions are confidential, Bloomberg reported.

France’s CAC40 Index slipped 0.1 percent, and Germany’s DAX Index declined 0.2 percent, while the UK’s FTSE 100 Index dropped 0.6 percent, as Burberry Group shares shed 3.5 percent.

The UK’s Investment Association, which advises fund managers, joined a chorus of critics and has issued an alert about Burberry, Bloomberg reported, citing a person familiar with the issue.

It focuses on awards to Chief Executive Officer Christopher Bailey and Chief Financial Officer Julie Brown, as well as performance conditions attached to the long-term incentive plan, the person said, according to Bloomberg.

(BusinessDesk)

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