U.S. Stocks, Dollar Gain as Manufacturing Surges: Markets Wrap

  • Trump’s tax battle, jobs report, Las Vegas shooting in focus
  • Political uncertainty in Europe following vote in Catalonia

Tax-Fueled Multiple Expansion Drives Market, Says Winer

U.S. equities rose to all-time highs and the dollar strengthened as factory data and the prospect for tax cuts boosted optimism in the economy.

The S&P 500 Index closed at another record to start the fourth quarter and the dollar headed for the strongest level since July after data showed U.S. manufacturing expanded at the fastest pace in 13 years. Oil fell toward $50 a barrel and Treasuries fluctuated. Investors are also watching developments in Las Vegas, where more than 50 people have died in the deadliest shooting in modern U.S. history.

Global shares began the final quarter of the year on firm footing amid signs manufacturing is strengthening. China reported an unexpectedly strong factory gauge and Bank of Japan’s quarterly Tankan survey showed the country’s big manufacturers are the most confident in a decade. While U.S. factories got a lift from two major hurricanes, the U.K. reported slowing growth.

Ian Winer, co-head of equities at Wedbush Securities talks about what can drive markets higher.

Daybreak: Americas." (Source: Bloomberg)

U.S. investors also took into account the prospects that Congress will enact a pro-growth tax plan and ongoing speculation that President Donald Trump will opt for a Fed boss who might pursue more aggressive policy tightening.

“What we’re looking at today is very similar to what we’ve been looking at the last couple of days and the last couple of weeks and it goes across a few lines,” Chris Harvey, head of equity strategy at Wells Fargo, said by phone. “One is the reinflation trade, the other one is tax reform and the third is technology.”

Stocks in Spain slumped and the common currency was one of the worst performers among major peers after a violence-marred vote in Catalonia spurred the regional government to press toward a unilateral declaration of independence. The tensions also had a clear impact in the bond market, with Spanish premiums rising as yields on comparable German debt declined.

Elsewhere, the pound tumbled on concerns about the stability of Prime Minister Theresa May’s government and after manufacturing data.

Terminal subscribers can read more in our Markets Live blog.

Among the key events this week:

  • Manufacturing PMIs for September are due for most of the world’s major economies.
  • Investors will monitor progress toward forming coalition governments in Germany and New Zealand after elections last month left no party in either country with a majority.
  • Other American data this week include trade, durable goods and Friday’s September non-farm payrolls report, which may have less predictive power than usual for the economic outlook due to likely distortions from hurricanes that hit from late August. 
  • Australia’s central bank on Tuesday is forecast to keep its benchmark interest rate unchanged at a record low of 1.5 percent.
  • The Reserve Bank of India on Wednesday is projected to keep benchmark rates unchanged.
  • China is due to report monthly foreign-exchange reserves Thursday.
  • Fed Chair Janet Yellen speaks at an event on Wednesday.
  • Minutes of the last ECB meeting are the European economic highlight this week.

Here are the main moves in markets:

Stocks

  • The S&P Index climbed 0.4 percent to 2,529.17 as of 4 p.m. New York time.
  • The Dow Jones Industrial Average rose 153 points to 22,558.42, another record close.
  • The Nasdaq 100 Index was steady as tech shares struggled.
  • The Stoxx Europe 600 Index increased 0.5 percent, highest since June.
  • The U.K.’s FTSE 100 Index climbed 0.9 percent to the highest in almost two months
  • Germany’s DAX Index jumped 0.6 percent to a record close.

Currencies

  • The Bloomberg Dollar Spot Index advanced 0.5 percent, headed to highest since July.
  • The euro fell 0.7 percent to $1.1737, near a six-week low.
  • The British pound decreased 0.9 percent to $1.3276, earlier falling the most since the June.

Bonds

  • The yield on 10-year Treasuries rose less than one basis point at 2.34 percent.
  • Germany’s 10-year yield dropped one basis point to 0.45 percent.
  • Britain’s 10-year yield decreased four basis points to 1.328 percent, the largest dip in more than three weeks.

Commodities

  • Gold declined 0.6 percent to $1,272.48 an ounce, the weakest in almost seven weeks.
  • West Texas Intermediate crude dipped 2.1 percent to settle at $50.58 a barrel, lowest level in more than a week.

— With assistance by Agnel Philip, and Sarah Ponczek

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