While you were sleeping: Treasuries, gold gain

Tuesday 20th December 2016

Wall Street moved higher, as did US Treasuries and gold, as investors remained upbeat about the outlook but also stocked up on more defensive assets.

US Federal Reserve Chair Janet Yellen noted optimism about the nation’s job market in prepared remarks for a commencement speech in Baltimore, Maryland. Last week the Fed lifted its key interest rate for the first time in a year, and signalled three rate hikes in 2017, one more than previously flagged. That underpinned optimism about the outlook for growth and profits.

“After years of a slow economic recovery, you are entering the strongest job market in nearly a decade,” Yellen said. “There are also indications that wage growth is picking up, and weekly earnings for younger workers have made strong gains over the past couple of years.”

“Challenges do remain,” according to Yellen. “The economy is growing more slowly than in past recoveries, and productivity growth, which is a major influence on wages, has been disappointing.”

Wall Street advanced. In 1.10pm trading in New York, the Dow Jones Industrial Average rose 0.2 percent, while the Nasdaq Composite Index climbed 0.6 percent. In 12.55pm trading, the Standard & Poor’s 500 Index increased 0.2 percent.

Gains in shares of Microsoft and those of United Technologies, recently trading 2.1 percent and 1.8 percent higher respectively, led the gains in the Dow. Bucking the trend were shares of Merck and those of UnitedHealth, down 1.5 percent and 1.2 percent respectively.

Weighing on sentiment was the death of Russia’s ambassador to Turkey after he was shot at an art exhibit in Ankara, the Turkish capital, on Monday in an assassination reportedly linked to Syria’s civil war.

"With the backdrop of where it happened, it is a strong enough and a powerful enough headline to have the market pause and see what the broader implications may be," Quincy Krosby, strategist at Prudential Financial in Newark, New Jersey, told Reuters.

US Treasuries also rose, pushing yields on the 10-year note to 2.54 percent.

In Europe, the Stoxx 600 Index finished the day with a 0.1 percent decline from the previous close.The UK’s FTSE 100 Index eked out a 0.1 percent gain, while Germany’s DAX Index rose 0.2 percent.

“Having come off a decent December so far for European stocks which have seen a number of significant breakouts, the key question as we head into year-end is whether these gains of the past two weeks are likely to be sustained,” Michael Hewson, a market analyst at CMC Markets in London, told Bloomberg.

France’s CAC 40 Index fell 0.2 percent.

Shares of France’s Danone closed 1.4 percent lower after the world's biggest yoghurt maker downgraded its estimate for its 2016 sales growth, citing market conditions in Spain and the revamp of its Activia yoghurt brand.

“In the fourth quarter, Activia’s performance as well as aggravated market conditions in Spain have impacted Europe Dairy results,” Danone said in a statement.

As a result, Danone said, it now expects 2016 sales growth to be “slightly below” its initial target of an increase between 3 percent and 5 percent. Even so, it expects to post recurring operating margin improvement above its previous target for a gain of between 50 basis points to 60 basis points.

BusinessDesk.co.nz

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