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While you were sleeping: Wall St, Treasuries advance

Thursday 1st March 2018

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Wall Street rose, as did US Treasuries, as investors reassessed the outlook for US interest rate increases. 

A Commerce Department report showed US gross domestic product grew at a 2.5 percent annual pace in the fourth quarter, down from a previous reading of a 2.6 percent rate.

The release comes a day after Federal Reserve Chairman Jerome Powell told the House Financial Services Committee that his “personal outlook for the economy has strengthened since December,” underpinning concern the central bank might accelerate the pace of interest rate increases beyond the three it has so far flagged for this year.  

Powell is set to testify again on Thursday before the Senate Banking Committee.

“Between now and the Fed meeting in March, what we’re seeing is a very traditional capital markets response to incoming economic data,” Bill Northey, senior vice president, US Bank Wealth Management, in Helena, Montana, told Reuters. 

“It’s part of the question out there. Has the reaction function of the Fed changed or will it change under Powell?” according to Northey.

In 1.38pm trading in New York, the Dow Jones Industrial Average rose 0.1 percent, while the Nasdaq Composite Index rose 0.6 percent. In 1.22pm trading, the Standard & Poor’s 500 Index gained 0.3 percent. 

US Treasuries rose, pushing the yield on the 10-year note one basis point lower to 2.88 percent.

“What the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s getting priced in,” Medha Samant, Fidelity International investment director, told Bloomberg. “The question is, despite all the upbeat data that we see coming out of the US, what is going to be the pace of these rate hikes and how quickly is it going to happen.”

In the Dow, gains in shares of United Technologies and those of Cisco Systems, recently up 1.8 percent and 1.5 percent respectively, outweighed declines in shares of General Electric and those of Procter & Gamble, down 2.1 percent and 1.7 percent respectively.

United Technologies rose amid reports that billionaire activist investor Bill Ackman’s Pershing Square Capital Management is building a position in the company. 

In Europe, the Stoxx 600 Index ended the day with a 0.7 percent decline from the previous close. The UK’s FTSE 100 index also dropped 0.7 percent, while France’s CAC40 Index retreated 0.4 percent, as did Germany’s DAX Index.

Shares of Monsanto rose as Reuters reported, citing two people familiar with the matter, that  German drug and crop chemicals maker Bayer is set to win conditional European Union antitrust approval for its US$62.5 billion bid for the world No. 1 seed company.

Bayer has already pledged to sell certain seed and herbicide assets for 5.9 billion euros (US$7.2 billion) to BASF to address EU regulatory concerns. The company will also give BASF a license to its digital farming data, and it appears BASF will have exclusive access as Bayer has not offered a legal obligation to license to other rivals, a person with knowledge of the matter has told Reuters.

Earlier on Wednesday, Bayer said additional antitrust concessions would include the sale of its vegetable seeds business. The European Commission, which is expected to issue a decision on the deal ahead of its April 5 deadline, declined to comment, according to Reuters.

Bayer also declined to comment on the sources' comments, saying it continued a constructive dialogue with the EU competition watchdog. It added the regulatory process in Europe was further advanced than in the United States where the deal also requires clearance, according to Reuters.

Shares of Monsanto traded 0.4 percent stronger as of 1.06pm in New York, while those of Bayer closed 1.8 percent weaker in Frankfurt. 


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