Markets Action-August 22nd/2017

Aayiz Abbasi
Aug 24, 2017 · 4 min read

Economy

U.S. new-home sales fell sharply in July and inventory levels jumped. Purchases of newly built single-family homes decreased 9.4%. Over the broader term, the market for single-family homes has strengthened. So far this year, sales have risen 9.2% compared with the same period a year earlier.

At the current sales pace, there was a 5.8-month supply of new homes on the market at the end of July, the highest level since September 2015.

The eurozone economy has enjoyed a surprisingly strong 2017, with growth accelerating in the three months to June and becoming more encompassing That has fueled expectations that the European Central Bank will start to wind down its purchases of government bonds from January. Since that would slow the supply of new euros, the currency has strengthened against the U.S. dollar and the British pound over recent months.

Markets:

A rally in global stocks stalled Wednesday after the Dow Jones Industrial Average’s biggest daily advance since April.

The blue chip index fell 73 points, or 0.3%, to 21826.38 shortly after the opening bell. The S&P 500 declined 0.4% and the Nasdaq Composite lost 0.3% following the tech-heavy index’s best session in more than a month.

Lowe’s was among the worst performers in the S&P 500 after the home-improvement retailer reported earnings that fell below analyst expectations and lowered its outlook for the year.

Saudi Arabia’s plan to list Saudi Arabian Oil Co. is sending other Middle Eastern nations rushing to raise capital on equity markets, potentially privatizing swaths of the state-run energy industry for the first time Already this year, there have been 32 IPOs in the Middle East, raising $1.5 billion. That is more deals than during the two previous years combined. Aramco’s IPO is slated for 2018. Estimates of the company’s value have ranged from less than $500 billion by some analysts to Saudi Arabia’s own $2 trillion price tag.

Elsewhere, the Stoxx Europe 600 edged down 0.5% following its best session in over a week. The media sector led declines as shares of WPP, the world’s largest advertising company, fell 10% after it lowered its forecast for the full year, reflecting a wider slowdown in industries such as consumer goods and retail.

Oil:

Oil prices flipped from losses to gains Wednesday as U.S. data showed that supplies of oil and gasoline fell and as investors tried to gauge the impact of a storm swirling in the Gulf of Mexico.U.S. crude futures settled up 58 cents, or 1.21%, to $48.41 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 70 cents, or 1.35%, to $52.57 a barrel on ICE Futures Europe.

Treasury Yields:

U.S. government bond prices rose Wednesday, as combative rhetoric from the White House pressured stocks while stoking demand for assets seen as safer stores of value.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.171% compared with 2.215% Tuesday. Yields fall as bond prices rise.

Stocks fell, while assets viewed by investors as havens like government bonds and gold climbed, after President Donald Trumpsaid Tuesday evening that he would shut down the government if necessary to secure funding to build a wall along the southwest border.

Commodities

Bullish investors are pushing the prices of copper, aluminum and other industrial metals to multiyear highs, betting that recent signs of resurgent global growth and falling supplies will stoke demand for raw materials.

Prices for copper hit their highest level in nearly three years last week, and zinc reached its highest price in a decade. Aluminum has climbed to three-year peaks and iron ore has rallied nearly 35% since the end of May. Shares of miners have also soared, with the MSCI World Metals & Mining Index up roughly 13% during that span.

Driving the gains are expectations that this year’s nascent rebound in global growth will continue, with major economies around the world shifting into higher gear after a long period of lackluster performance. Many investors are also betting that reduced supplies and a selloff in the dollar will continue boosting prices, which had fallen in recent years alongside other commodities as new producers saturated markets.

US Dollar

The U.S. dollar advanced Tuesday as investors awaited comments from central bankers at the end of the week. The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket of 16 others, gained 0.4% to 86.22. Expectations of higher interest rates are a boon to the dollar, as they make the currency more attractive to yield-seeking investors. With the U.S. currency down 7.2% this year, the dollar would have plenty of room to rally on hawkish Fed

The Mexican peso, among the year’s best-performing currencies, dropped 0.6% against the dollar after the comments on trade and a border wall, while gold climbed 0.2% as assets seen as safer stores of value found favor.

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Jeep, the crown jewel of Fiat Chrysler Automobiles FCAU 7.05% NV and a world-wide symbol of American military and manufacturing might, has an interested Chinese suitor, the latest sign of an industry in the midst of a global reshuffling.

Great Wall Motor Co. plans to make a bid for Fiat Chrysler’s lucrative Jeep brand, known for rugged sport utilities that rose to prominence in World War II as the can-do vehicle of the U.S. military.

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