Equities rise on positive earnings reports - 20.10.2016

The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six major currencies, slipped 0.01% to 97.829. The Dow Jones industrial average gained 0.2% to 18203.17. The S&P 500 added 0.2% settling at 2144.33 led by energy stocks, up 1.4%. The Nasdaq ended 0.05% higher at 5246.41 with 5.9% drop in Intel shares limiting the gains of the technology index after the chip maker reported a weak revenue outlook. Morgan Stanley was the third major bank after Goldman Sachs and JP Morgan reporting stronger than expected earnings, which helped buoy market sentiment and financial shares. Financial stocks ended 0.8% higher. Other economic data were not particularly strong: housing starts fell 9% in September, but on positive side building permits jumped to 6.3% from 0.7% pointing to higher starts soon. At the same time the beige book, an anecdotal survey of business conditions at Fed’s districts, said the US economy in most of the country grew at a steady but modest rate. Investors have yet to see a decisive improvement in US economy and corporate earnings to justify a sustained break above recent stock market highs given relatively high stock valuations and expectations of an impending rate hike. In a comment supporting the view the Fed may not raise rates soon Dallas Fed President Robert Kaplan said the Fed could afford to be patient about raising rates. Today at 14:30 CET Initial Jobless Claims and Continuing Claims will be released, the outlook is negative for dollar. At 16:00 CET September Existing Home Sales and Leading Indicators will be published, the outlook is positive for dollar.

The Stoxx Europe 600 rose 0.3%. Among oil producers Spain’s Repsol closed up 1.5% and Norway’s Statoil gained 1.2%. Germany’s DAX 30 underperformed finishing 0.1% higher at 10645.68. France’s CAC 40 added 0.3% with UK’s FTSE 100 also adding 0.3% to 7021.92. Today September Retail Sales came in flat in UK instead of an expected 0.3% rise. At 13:45 CET European Central Bank Rate Decision will be released, no change in policy is anticipated with the interest rate expected to remain at 0%, the deposit rate at minus 0.4%. However, there is some uncertainty whether the central bank will change its bond purchases program. On October 4 Bloomberg reported that ECB officials had discussed scaling back €80 billion ($88 billion) monthly bond purchases but the ECB denied that tapering hadn’t been discussed. There has been little progress in spurring inflation to move toward the 2% target rate in euro-zone. There is clearly a need for further stimulus for euro-zone economy despite the ECB declined to commit to an extension of the central bank’s public bond-buying program past March 2017 at its September meeting. Earlier in June the ECB began buying around €9 billion in corporate bonds as part of its €80 billion in monthly purchases. At 14:30 CET the ECB Press Conference starts.