U.S. indices closed higher on Wednesday, as the Federal Reserve signaled policy easing. The Nasdaq climbed to a record high, while the Dow Jones Industrial Average and the S&P500 posted intraday record highs before easing back. Shares in the Energy (+1.4%), Media (+1.36%) and Food, Beverage & Tobacco (+0.98%) sectors led the gains. Fed Chairman Jerome Powell reaffirmed, during his Congressional testimony, that the Fed “would act as appropriate to sustain the expansion”, citing “increased uncertainties about the economic outlook and muted inflation pressures”. On the other hand, the latest Fed’s FOMC meeting minutes showed that “many participants indicated that the case for somewhat more accommodative policy had strengthened”. The S&P 500 (2,993.07) stays above its 20d moving average (2,940.62 – positive slope) and its 50d moving average (2,888.50 – positive slope).
European markets are expected to start on a positive note.
Foreign Exchange
The US dollar was bearish against all its major pairs on Wednesday. On the economic data front, MBA Mortgage Applications decreased by 2.4% in week ended July 5 compared with a 0.1% decrease in the previous week. Wholesale Inventories increased by 0.4% in final estimation in May (estimated 0.4%) vs. a 0.4% increase in the previous month. At the Federal Open Market Committee, Jerome Powell affirmed keeping the federal funds rate at a range of 2.25%-2.5% and left the door open for a rate cut. Although the economy remains sound on an employment rate basis, in the minutes he said “uncertainties about the [economic] outlook have increased”.
The Euro was bearish against all of its major pairs with the exception of the CHF. In Europe, the European Commission lowered its euro-zone 2020 GDP growth forecast to 1.4% from a previous anticipation of 1.5%, made in spring. French industrial production increased by 2.1% in May (+0.3% anticipated) after a 0.5% rise in April. UK GDP growth was 0.3% in May, as expected, after a 0.4% slid a month earlier. Separately, UK industrial production increased by 1.4% in May (+1.5% anticipated) after a 2.9% slid a month earlier (revised from -2.7%). Finally, UK trade balance deficit narrowed to £2.32B in May (£3.2B expected) from £3.72B in April (£2.74B).
The Australian dollar was bullish against all of its major pairs.
Commodities
After the close of Wall Street, WTI Crude Future (AUG 19) was up $2.5 to $60.35. The contract was above its 20D MA (@ $56.52) and above its 50D MA (@ $58.2). The US Department of Energy reported that, for the week ended 5 July, crude oil inventories fell 9499k barrels compared to the previous week.
Gold was up $20.2 to $1417.8. The precious metal was above its 20D MA (@ $1392) and above its 50D MA (@ $1335).
Copper Future (SEP 19) on Comex was up 6.4c to 268.9c/lb. The contract was above its 20D MA (@ 268.22c) and below its 50D MA (@ 270.72c). In Europe, the London Metal Exchange reported its copper inventories decreased 2500 tons to 293525 tons.