Financial Market Review for December 12 2017 Asian shares took a small step back on Tuesday after three straight sessions of gains, with markets consolidating in the hope an upswing in global growth could outlast a likely hike in U.S. borrowing costs this week. The latest promising news came from China where banks doled out a surprisingly generous dose of credit in November, which could bode well for a pickup in retail sales and industrial output due later in the week. MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) drifted off 0.3 percent, having bounced 2 percent in the past three sessions. Moves were minor across the region, with blue-chip Chinese shares down 0.5 percent . Japan's Nikkei eased 0.3 percent, after the index scored its highest close in 25 years on Monday. Speculators pointed to a modestly firmer start on most European bourses, while E-Mini futures for the S&P 500 were up a slim 0.04 percent. Wall Street had been led higher by technology and energy stocks, with Apple Inc making the biggest contribution. The Dow rose 0.23 percent, while the S&P 500 added 0.32 percent and the NASDAQ 0.51 percent. There was no lasting market impact from an explosion in New York's busy Port Authority commuter hub, described by New York Mayor Bill de Blasio as an "attempted terrorist attack". Investors continued their policy vigil with the Federal Reserve set to end its two-day meeting on Wednesday, while the European Central Bank meets on Thursday. The divergence in Fed and ECB policy was supposed to be bullish for the dollar, given it had widened the premium offered by U.S. two-year yields (US2YT=RR) over German yields (DE2YT=RR) to 256 basis points from 188 basis points this time last year. Yet the euro is currently up 12 percent on the dollar this year, while the dollar is down 8 percent on a basket of currencies ,an indication interest rate differentials aren't everything in forex. On Tuesday, the euro was steady at $1.1772 having failed to clear resistance around $1.1812 overnight. The dollar was idling at 113.48 yen, just off a one-month top of 113.69. The dollar held firm near two-week highs versus a basket of major currencies on Tuesday, with traders awaiting the U.S. Federal Reserve's policy meeting this week for fresh catalysts. The dollar index, (DXY) which tracks the greenback against a basket of six major peers, inched up 0.1 percent to 93.931. That was within sight of Friday's peak of 94.087, the highest since Nov. 21. The Fed is widely expected to raise interest rates at its two-day policy meeting that will end on Wednesday and is expected to tighten policy further next year. Most economists polled by Reuters now expect three more rate rises next year compared with two when surveyed just weeks ago, although the outlook remains clouded by stubbornly subdued inflation.
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Financial Market Review for December 12Â 2017 Since a rate hike this week has been priced in, the dollar could sag initially after the Fed's policy announcement, The Fed, however, will probably sound optimistic about the economic outlook and that is likely to help underpin the greenback. Against the yen, the dollar eased 0.1 percent to 113.48 yen, after having risen to as high as 113.69 yen on Monday, the dollar's strongest level in about a month. The dollar could come under pressure if Fed Chair Janet Yellen sounds less confident that inflation will rise toward the central bank's 2-percent target, in her remarks during a post-meeting news conference, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo. The New Zealand dollar, which had climbed nearly 1.1 percent on Monday following the announcement, extended its gains on Tuesday and rose to $0.6937 at one point, its highest level since Nov. 28. It was last trading at $0.6927, up 0.3 percent on the day. In Commodity market, Brent oil prices jumped by 1 percent on Tuesday to their highest since mid-2015, after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market already tightening due to OPEC-led production cuts. Brent crude futures, the international benchmark for oil prices, were at $65.32 a barrel up 63 cents, or 1 percent, from their last close. The contract hit a high of $65.70 a barrel earlier in the day. That marks the first time Brent has risen above $65 since June, 2015. U.S. West Texas Intermediate crude futures were at $58.38 a barrel, up 39 cents, or 0.7 percent, from their last settlement. Britain's Forties oil pipeline, the country's largest at a capacity of 450,000 barrels per day (bpd), shut down on Monday after cracks were revealed. "The market reaction shows that in a tight market, any supply issue will quickly be reflected in higher prices," said ANZ bank. Analysts said there was also oil price support from the consumer side. "Demand growth across the commodity complex is extremely robust. And inventories across the complex have been declining sharply," U.S. bank Goldman Sachs (NYSE:GS) said in a note to clients. The jump in Brent prices widened its premium to WTI prices to as much as over $7 a barrel, the highest premium since May 2015 and up from around $5 last week, making U.S. oil exports more attractive. Cheaper WTI is also a result of rising U.S. oil production, which has jumped by more than 15 percent since mid-2016 to 9.71 million bpd, levels not seen since the early 1970s. U.S. production is now also not far off that of top producers Russia and Saudi Arabia. The rising U.S. output threatens to undermine efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC producers, most importantly Russia, to support prices by withholding supplies.
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Financial Market Review for December 12Â 2017 OPEC and its allies started withholding supplies last January and currently plan to continue doing so throughout 2018. View our full economic calendar for a daily roundup of major economic events.
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