While you were sleeping: Turkey offsets GDP boost

Wednesday 25th November 2015

Wall Street was mixed amid concern about rising international tensions after Turkey downed a Russian military plane near its border with Syria, offsetting fresh evidence of better than expected US economic growth.

In New York trading at about 12.07pm, the Dow Jones industrial average eked out a 0.05 percent gain. At about 11.52am trading, the Standard & Poor’s 500 Index fell 0.15 percent, while the Nasdaq Composite Index declined 0.34 percent.

“This has really gotten investors' attention,” Jack Ablin, chief investment officer at BMO Private Bank in Chicago, told Reuters. "Investors are worried that tensions could escalate."

Airline stocks fell after the US on Monday issued a global travel alert for Americans because of “increased terrorist threats”.

In the Dow, gains in shares of Chevron and those of Exxon Mobil, last up 2.3 percent and 2.1 percent respectively, offset slides in shares of Merck and those of United Technologies, last 1.4 percent and 1.1 percent lower respectively.

Shares of Chevron and Exxon Mobil rose with the price of oil, which climbed on the incident between Russia and Turkey. Benchmark Brent rose to a two-week high of US$46.50, while US crude's West Texas Intermediate futures touched US$43.46 earlier in the session.

Eyes are on the December 4 OPEC meeting to gauge the outlook for the global glut.

"Ultimately, we still see a drop to around US$37.75, but such a development is not expected until the market gets through the OPEC meeting at the end of next week and when increasingly bearish global supply balances place additional pressure on the WTI curve," Jim Ritterbuch of Chicago-based oil consultancy Ritterbusch & Associates, told Reuters.

Meanwhile, some say US equities hold relatively more appeal.

“When you see this type of uncertainty happening, it reinforces looking at the US as a safe haven,” Tom Anderson, chief investment officer at Boston Private Wealth, told Bloomberg. “The US economy is in very solid shape. We’re pretty positive on equities as a result. But there’s certain to be noise and volatility around those events.”

There was fresh evidence of the strength of the US economy, which also underpinned expectations the Federal Reserve might feel comfortable enough to raise interest rates next month, for the first time since 2009.

A Commerce Department report showed US gross domestic product increased at a 2.1 percent annual pace in the third quarter, up from the 1.5 percent rate estimated last month.

"This is a sturdy second GDP print for the third quarter when looking past the inventory swings," Robert Kavcic, a senior economist at BMO Capital Markets in Toronto, told Reuters. "Importantly, domestic demand in the US economy remains very solid, something that will surely give comfort to the Fed as it ponders its next move."

Separately, the S&P/Case Shiller composite index of 20 metropolitan areas jumped a larger-than-expected 5.5 percent in September on a year-over-year basis, up from 5.1 percent in the year to August.

In Europe, the Stoxx 600 Index finished the day with a 1.2 percent slide from the previous close. The UK’s FTSE 100 Index fell 0.5 percent, while Germany’s DAX Index sank 1.4 percent, as did France’s CAC 40 Index.

BusinessDesk.co.nz

Comments from our readers

No comments yet