The minutes of the December 13-14 FOMC meeting, released Wednesday evening, should reflect the moderately more hawkish tone of the meeting statement. Recall that last month, it was widely expected for the FED to change rates, however the FED’s indications for 2017 were not. They indicated that 3 interest rate rises are expected while the market only expected 2. Yesterday, we got strong data releases across the board. In the US, ISM manufacturing rose to 54.7 in December from 53.2 in November. In Europe, German HCIP inflation also surprised significantly on the upside yesterday.
Currencies: The strong US data gave rise to the USD, which managed to push EUR to its lowest since 2003 at 1.0341 before bouncing to 1.04 again. Against the Japanese yen, the Dollar was up 0.2% at 111.97 after slipping to 117.54. The U.S. currency surged overnight to a near three-week peak of 118.60. The pound was little changed at $1.2238 after falling overnight to a 2-month low of $1.2200.
Stocks: Shares rose globally overnight and yesterday but closed off highs when oil prices gave back their gains. Helped by the impressive ISM data, The S&P 500 closed about 0.8 % higher while the Dow gained about 120 points after rising as much as 176 points in the day. Chinese stocks closed higher on the back of strong domestic data and of crude oil’s spike, with the Shanghai composite rising 1.04 %. European equities also rose, with the Stoxx 600 Europe index advancing 0.7 %.
Oil and Gold: Crude prices hit 18-month highs amid hopes that a deal struck between OPEC and non-OPEC countries to cut production will reduce excess supply. At session highs, U.S. crude prices had gained more than 2 %. However, they settled 2.6 % lower at $52.33 per barrel as concerns that Libya will increase production hurt investor sentiment. Prices of Gold on the other hand settled at nearly a 3 week high of $1164. It managed to climb even as the dollar rose to new a 14-year high against a basket of other major currencies. A stronger dollar normally weighs on commodities priced in the currency, making them less affordable to international buyers. Gold has seen its prospects diminish over the past two months as the dollar gained demand.