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While you were sleeping: Fed bolsters December hike bets

Thursday 2nd November 2017

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Wall Street was mixed, after the three US benchmark equity indexes touched fresh record highs, amid optimism about corporate earnings, while Federal Reserve policy makers cemented bets for a December interest rate increase. 

The Federal Open Market Committee, in a unanimous vote, kept its target interest rate unchanged. 

Recent data shows that "the labour market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions," the Fed said in a statement after a two-day meeting.

Indeed, an ADP Research Institute report on Wednesday showed that US private employers hired 235,000 workers in October. That was more than economists had predicted. 

“It’s business as usual even with the hurricane disruptions. It confirms a December move," Gregory Daco, chief US economist at Oxford Economics in New York, told Reuters.

Meanwhile, US President Donald Trump is expected to nominate Jerome Powell as the next chairman of the Fed, replacing Janet Yellen, whose term expires early next year, the New York Times reported, citing two people familiar with the plans. The announcement could come as soon as Thursday. 

“If we get a confirmation that Trump picks Powell tomorrow, it’s a sign that monetary policy will continue on its current course that we have seen so far this year, with gradual normalisation,” Daco told Reuters. “We would see a few rate hikes in 2018 depending on any fiscal stimulus we might get.”

In 2.18pm trading in New York, the Dow Jones Industrial Average rose 0.2 percent. However, the Nasdaq Composite Index fell 0.3 percent. In 2.04pm trading, the Standard & Poor’s 500 Index added 0.2 percent. 

The Dow touched a record high 23,517.71 earlier in the day, while the S&P 500 reached a record 2,588.40, and the Nasdaq also climbed to a record 6,759.66. 

“Earnings drive the markets, and they continue to be really good,” JJ Kinahan, chief market strategist at TD Ameritrade in Chicago, told Reuters. 

The Dow moved higher as gains in shares of Intel and those of Walt Disney, recently up 1.5 percent and 1.4 percent respectively, outweighed slides in shares of Apple and those of UnitedHealth Group, recently down 1.5 percent and 1 percent respectively.

Europe’s Stoxx 600 Index ended the day with a 0.7 percent climb from the previous close. The gauge closed at its highest level in more than two years and investors are optimistic about European equities, according to Bloomberg. 

“We expect the rally to continue into the year-end,” Peter Garnry, head of equity strategy at Saxo Bank in Copenhagen, told Bloomberg. “The euro isn’t strengthening, the data looks fine, the situation in Spain is under control, and we’ve got the [European Central Bank] basically handing the market a put option.”

France’s CAC 40 Index rose 0.2 percent, while Germany’s DAX Index rallied 1.8 percent. 

The UK’s FTSE 100 Index slipped 0.1 percent.



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