Morning Notes

22/09/2017 Argonaut Morning Note

Market Update & Important Indicators
Declines in shares of technology and consumer-staple stocks intraday threatened to end major indexes' run of recent gains. Some investors and analysts attributed the stall in the stock market to lingering uncertainty after the Federal Reserve suggested Wednesday that it was open to the possibility of an interest-rate increase in December. A streak of soft inflation data had made some investors skeptical the Fed would raise rates again in 2017. The fact that the central bank signaled otherwise caught some investors off guard. The Dow Jones Industrial Average slipped 36 points, or 0.2%, to 22376, on track for declines after nine consecutive sessions of advances. The S&P 500 slid 0.2%, while the tech-heavy Nasdaq Composite fell 0.3%. The U.S. gold price traded lower overnight, dropping a further 0.8% to close at 1,290.60 US$/oz.

European stocks ended mostly higher, with banks stocks marching higher after the Federal Reserve indicated it will continue to raise official interest rates. The Stoxx Europe 600 index rose 0.2% to 382.88, closing at its highest level since July 20. On Wednesday, the benchmark closed fractionally lower as investors marked time before the highly anticipated Fed policy announcement. After European trade closed Wednesday, the Fed said it would begin to shrink its huge $4.5 trillion balance sheet in October. The U.S. central bank also signalled plans for one more increase in interest rates before the end of 2017, which should lift borrowing costs for auto loans, mortgages and business loans. Fed policy makers also hinted at another three rate increases in 2018. The prospect of higher interest rates bolstered bank stocks on Wall Street and in Europe, where the Stoxx Europe 600 Bank Index charged up 1.4% to a more-than one-month high. Germany's DAX 30 index rose 0.3% to 12,600.03, and France's CAC 40 index picked up 0.5% to 5,267.29. The U.K.'s FTSE 100 index fell 0.1% to 7,263.90. Spain's IBEX 35 advanced 0.1% to 10,297, after closing 1.2% lower on Wednesday as Spanish police arrested 13 Catalan officials in a battle over a regional independence referendum.

The downside ultimately won in Asian stocks. Markets in the region didn't have a broad initial direction following the FOMC's overnight releases, which ultimately didn't move U.S. stocks much from pre-disclosure levels. But as the afternoon progressed in Asia, most markets leaned lower. Afternoon selling in Shenzhen resulted in declines. Meanwhile, Japanese stocks lost much of their morning gains, with the Nikkei ending up just 0.2%. A highlight was Taiwan, which reversed Wednesday's decline. Taiwan's TAIEX index rose 0.6%. Indexes elsewhere in Asia were little changed, with slight declines in Hong Kong, Shanghai and South Korea.

Australian stocks may be breaking through the narrow range they've been in, logging region-beating declines as the S&P/ASX 200 notched a 7 1/2-month closing low. The S&P/ASX 200 fell 0.9% to 5655.4, the index's third-straight decline - and sixth in seven sessions - while putting it in negative territory for the year.

The London Metal Exchange’s 3-month copper contract traded lower overnight, losing 0.7% to finish at $6,480/t. The other base metals finished mostly lower. Nickel prices fell 3.4% to 11,310/t, while aluminium prices lost 0.2% to close at 2,146/t. Lead prices were stronger, gaining 3.0% to close at 2,518/t, whilst Zinc prices shed 1% to 3,117/t. Tin prices pulled back 0.7% to finish at 20,590/t.

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