On 01 March, 2017 – Stocks rallied globally

A combination of hawkish Fed speak and a positive reaction by traders to President Trump’ address to Congress stirred market bulls.
United States
US stocks staged a rally Wednesday with the Dow Jones industrials closing above the 21,000 level for the first time. Financials led the way — market expectations for a Federal Reserve interest rate increase have sharply increased after some fed speakers’ hawkish comments. New York Fed President William Dudley said on CNN that the case for raising US interest rates has become “a lot more compelling” since the November election. Federal Reserve Bank of San Francisco president John Williams also sounded hawkish talking up the odds of a rate increase at the mid-March FOMC meeting. The Dow was up 1.5 percent, the S&P gained 1.4 percent and the Nasdaq added 1.5 percent.
A sharp a jump in Treasury yields sparked by the hawkish Fed commentary boosted bank shares amid expectations they will be able to charge higher rates for loans while keeping a lid on their own borrowing costs.
There were several key economic data releases. The February ISM manufacturing index indicated that manufacturing growth accelerated to a reading of 57.7 from 56.0 the month before. However, construction spending in January declined 1.0 percent thanks to weakness in public spending.
The Federal Reserve published its Beige Book in preparation for its March 14 and 15 FOMC meeting. Once again, economic activity is described as modest to moderate. And inflation is also described as modest, including selling prices, with some wage pressures also cited again. Retail sales were described as subdued with modest growth the description for the energy sector. Acceleration continues for manufacturing though the strength in the dollar is once again described as a headwind. There is less optimism for the factory sector amid what the report describes as uncertainties among a few manufacturers over the new president’s policies.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$15.20 to US$1,240.40. Copper futures were up 0.7 percent to US$2.73. WTI spot crude was down 34 US cents to US$53.67. Dated Brent spot crude was down 26 US cents to US$56.25. The US dollar was up against the yen, euro, pound, Swiss franc and the Canadian dollar. The currency was unchanged against the Swiss franc and the Australian dollar. The Dollar Index was up 0.4 percent. The yield on US Treasury 30 year bond was up 9 basis points to 3.06 percent while the yield on the 10 year note was up 11 basis points to 2.45 percent.
Europe
European stocks rallied Wednesday — traders reacted positively to Tuesday nights (US ET) speech by US President Donald Trump. The speech lacked details on his plans for tax reform and replacing Obamacare, but the President struck a softer, more conventional tone. The FTSE hit a new high after it gained 1.6 percent. The CAC was up 2.1 percent, the DAX advanced 2.0 percent and the SMI was 1.0 percent higher.
Hawkish comments from Federal Reserve officials pushed euro and pound lower against the US dollar. New York Fed President William Dudley said on CNN that the case for raising US interest rates has become “a lot more compelling” since the November election. Federal Reserve Bank of San Francisco president John Williams also talked up the odds of a rate hike in mid-March.
Rheinmetall jumped after reporting a better-than-expected 23 percent jump in fiscal 2016 earnings before interest and taxes. Nordex surged — the wind turbines maker reported that its fiscal 2016 consolidated net profit grew 82.4 percent from the previous year to €95.4 million. Covestro tumbled after Bayer said it is reducing its holding in the separately listed chemicals subsidiary.
Airbus increased after saying it has finalized the sale of its Germany-based defense electronics business to private equity firm KKR. CRH advanced after it posted significant growth in 2016, with margins and returns ahead of last year in every division. Television company ITV climbed after its overall group revenue grew by 3 percent for 2016. Standard Chartered, HSBC and Barclays gained. Miners BHP Billiton, Glencore, Anglo American and Rio Tinto advanced. However, gold miners Fresnillo and Randgold Resources retreated along with the price of gold.
February Eurozone manufacturing PMI rose to 55.4 from 55.2 in January. This was the highest reading since April 2011. In the UK, the manufacturing PMI eased to 54.6 from 55.7.
Asia Pacific
Most Asian stocks rose Wednesday as the Japanese yen continued to decline, oil prices inched higher in Asian trading and Chinese, Japanese and Australian economic data painted a positive picture of regional economies. Meanwhile, in his first address to Congress, US President Donald Trump struck an optimistic tone and promised a “renewal of the American spirit” with his economic goals and priorities but again offered few policy details.
The Nikkei and Topix advanced 1.4 percent and 1.2 percent respectively. Exporters received a boost from a relatively weaker yen and the Nikkei February manufacturing PMI improved to a reading of 53.3, at a pace not seen in nearly three years. Exporters Honda, Hitachi, Mazda Motor, Nissan, Panasonic, Sony and Toyota climbed as the yen retreated on hawkish comments from Fed officials who raised the odds of a rate increase in mid-March.
However, The S&P/ASX and All Ordinaries slipped 0.1 percent and 0.2 percent respectively even though the October to December quarter gross domestic product rebounded 1.1 percent on the quarter and was up 2.4 percent. Separately, the latest manufacturing PMI surged to its highest level since May 2002. Telstra and Crown Resorts fell on going ex-dividend. Retailers JB Hi-Fi, Myer Holdings and Harvey Norman retreated after reports that global e-commerce and cloud computing behemoth Amazon has advanced its plans to set up an Australian operation. Miners BHP Billiton, Rio Tinto and Fortescue Metals Group were lower. Oil majors Oil Search, Origin Energy, Santos and Woodside Petroleum also were down. Gold miners Newcrest and Northern Star dropped after gold prices slipped overnight. But the big four banks advanced.
The Shanghai Composite added 0.2 percent after data showed activity in China’s manufacturing sector expanded faster than expected in February. The CFLP PMI rose to a three-month high of 51.6 while the Caixin/Markit manufacturing PMI climbed to 51.7 from 51.0. The Hang Seng also added 0.2 percent. The Sensex was up 0.8 percent. India’s manufacturing PMI showed improvement for the second straight month in February, driven by a rebound in export demand.
Looking Forward
Australia posts January merchandise trade balance. Switzerland posts fourth quarter gross domestic product and January retail sales. The Eurozone releases February flash harmonized index of consumer prices and January producer prices and unemployment rate. Canada releases fourth quarter gross domestic product and monthly GDP for December. The US reports weekly jobless claims, money supply and Fed balance sheet.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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