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While you were sleeping: US dollar weakens

Thursday 9th June 2016

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Wall Street moved higher, pushing the Standard & Poor’s Index closer to a record high, amid expectations low interest rates will help underpin economic growth.

Commodities including oil, copper, gold and aluminium benefited from a declining US dollar after Federal Reserve Chair Janet Yellen’s comments on Monday prompted a revision of bets for next week’s Federal Open Market Committee meeting.

Traders now see a zero percent chance the Fed will raise rates at its June 14-15 meeting, down from 22 percent a week ago, futures contracts indicate, according to Bloomberg.

"The [US] dollar continues to remain soggy with June priced out and chances that the Fed will move in July waning," Jane Foley, senior currency strategist at Rabobank, told Reuters. “Investors will need some good payrolls data and signs of inflation picking up, before they are convinced that a rate hike in September is on the cards.”

US stocks moved closer to record highs. In 1.24pm New York trading, the Dow Jones Industrial Average rose 0.22 percent. In 1.45pm New York trading, the Standard & Poor’s 500 Index gained 0.2 percent. In 2pm trading, the Nasdaq Composite Index increased 0.21 percent.

“No matter what you throw at this market, it keeps wanting to go higher,” Walter Todd, chief investment officer for Greenwood Capital Associates in South Carolina, told Bloomberg. “Sentiment, as has been well documented, is pretty bad and the market tends to inflict the most pain on the most people. And the most people it seems are underweight the market or out of the market.”

In the Dow, gains in shares of UnitedHealth and those of Caterpillar, last trading 2.6 percent and 1.3 percent higher respectively, outweighed declines in shares of Goldman Sachs and those of Verizon Communications, down 0.8 percent and 0.7 percent respectively.

A seven-week strike by Verizon wireline workers will crimp the company's second-quarter earnings and may cost up to 7 cents per share, the company’s CFO Fran Shammo said at the Bank of America Merrill Lynch global telecom and media conference, according to Reuters.

The latest US economic data cast fresh disappointment on the jobs market. The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS, showed a surprise increase in job openings in April to equal the highest level on record. The rate of hiring fell to 3.5 percent in April, down from 3.7 percent in March, which was the slowest pace in almost two years.

Even so, the Commerce Department's quarterly services survey offered reasons for optimism on growth.

"The upward revision to services consumption also has favourable forward-looking implications for second quarter GDP growth," Daniel Silver, an economist at JPMorgan in New York, told Reuters.

In Europe, the Stoxx 600 Index ended the session with a decline of 0.5 percent from the previous close. France’s CAC 40 index fell 0.6 percent, while Germany’s DAX index dropped 0.7 percent. The UK’s FTSE 100 index rose 0.3 percent.

“Markets are generally struggling to find a direction at a time when economic data is not bad, but it’s not great either,” Michael Hewson, a market analyst at CMC Markets in London, told Bloomberg. 

On Wednesday the World Bank cut its 2016 global growth forecast to 2.4 percent, down from the 2.9 percent estimated in January, citing sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows.

“Ultimately, the global outlook remains pretty weak," Hewson noted. "The World Bank did not just cut the forecast, it suggested that the risks were tilted to the downside. Now we are getting a little bit of profit taking.”

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