While you were sleeping: Fresh records on Wall St

Thursday 8th December 2016

Wall Street rose, pushing both the Dow and the S&P 500 to record highs, as optimism about the outlook for the US economy and corporate profits gained traction.

“Things were already improving before the election,” Jeremy Zirin, chief equity strategist at UBS Wealth Management Americas, told the Wall Street Journal. “What’s happened since is that many of the pro-growth trends have been exacerbated.”

In 1.05pm trading in New York, the Dow Jones Industrial Average climbed 0.7 percent, while the Nasdaq Composite Index gained 0.5 percent. In 12.50pm trading, the Standard & Poor’s 500 Index increased 0.4 percent.

The Dow rose to a record, led by advances in shares of Home Depot and those of American Express, recently both trading 1.9 percent higher.

Bucking the trend were shares of Pfizer, Johnson & Johnson, and Merck—down 2.5 percent , 2 percent and 1.6 percent respectively—after US President-elect Donald Trump told Time magazine he planned to lower the cost of prescription drugs.

“I think it is a new fact of life going forward, that fundamentals can be swept aside any day by comments from the [President-elect],” David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, told Reuters.

In Europe, the Stoxx 600 Index ended the day with a 0.9 percent gain from the previous close. France’s CAC 40 Index advanced 1.4 percent, the UK’s FTSE 100 Index rallied 1.8 percent, while Germany’s DAX Index jumped 2 percent.

Underpinning the rally were bets that the European Central Bank will announce an extension of its asset purchase program at the end of a policy meeting on Thursday.

In Europe, cheaper valuations add to the appeal for some.

“Though we’re not raging bulls on Europe, it’s a region we now strongly prefer over the US,” said Alan Mudie, head of investment strategy at Societe Generale’s private banking unit, at a briefing in London, Bloomberg reported. “It’s not just because of valuations, it’s also the fact that Europe is more geared to the improving global economy. That was a curse this year but will be a big benefit in 2017.”

Oil prices fell amid concern US shale producers might raise output next year, while OPEC agreed to reduce production.

"It's going to be a cat and mouse game between OPEC and shale oil in America," Glencore Chief Executive Officer Ivan Glasenberg said this week, according to Reuters.

"OPEC members will say, 'if you [raise output], we are going to ramp up production and push oil back down to $35’,” Glasenberg said. “I hope shale in America will be responsible and realise what's happened and allow the higher oil price to be sustained.”

BusinessDesk.co.nz

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