US investors have continued to push stock indices to record highs with the large tech stocks taking a break while the financial sector and the energy sector take the lead. Rising interest rates and a better credit profile for US customers has given the banks the ability to generate rising profits and the rising price for oil is helping the sector. With expectations high that the US Fed will continue to raise interest rates a further 0.25% at the meeting this Thursday most analysts consider that the economy is strong enough for at least a few more in the coming months.
Trade tensions continue between the US and China with tariffs being applied by both sides today and more threatened. This has the potential to derail the global economy if investors take fright and perhaps the US Fed may need to hold fire in raising rates and this may explain why the US Dollar has shown some weakness recently. The EUR continues to perform well after breaking key resistance last week at 1.1720 and has the potential to head towards 1.2100 which could put further pressure on the USD. Comments tonight by ECB Head to the Euro parliament highlights how the Eurozone has improved over the past decade and the market is now looking for some stimulus to be removed next year.
US bond yields are at the upper end of the recent trading range of 2.80-3.10% over the past few months with the potential for higher rates. Given that other major economies have not really started to reduce the stimulus and increase rates the US bonds are very attractive above 3% to yield hungry investors.
Latest prices are:
Dow Jones 26682 down 44 / S&P500 2921 down 7 / Nasdaq100 7476 down 51.
EUR 1.1812 up 67 / GBP 1.3160 up 81 / JPY 112.600 weaker by 5 / DXY 93.52 down 28.