Yesterday’s torrid US market “melt-up”, which was the strongest post-midterm rally since 1982 after an election whose outcome was supposedly “priced in”, has faded with futures dipping 0.4% as traders shift their attention to today’s FOMC decision.
Even with the US taking a breather, world stocks enjoyed the eighth straight session of gains in their longest winning streak of the year on Thursday, as strong trade data from China kept the momentum from the previous day’s U.S. rally rolling.
European shares initially jumped to a one-month high, though they have since pared most of their earlier gains despite solid results from Siemens, SocGen and Commerzbank and Sodexho which eased concerns about slowing corporate earnings in Europe. Asia and Wall Street had set similar milestones overnight. Japan’s Topix jumped 1.7% and shares in Hong Kong and South Korea also posted solid gains.
Hong Kong’s Hang Seng advanced 0.3 percent while the Shanghai Composite dipped 0.2 percent, unable to hold on to gains from stronger-than-expected October Chinese exports data. Australian stocks rose 0.5 percent too, South Korea’s KOSPI added 0.7% and Japan’s Nikkei surged 1.8 percent, which was almost as much as Wall Street’s 2 percent leap.
Earlier in the day, China reported that exports growth picked up modestly to 15.6% yoy in October, and imports growth also accelerated to 21.4% yoy in October. Both readings are above consensus. However, in sequential terms, exports slowed to 1.2% mom sa non-annualized, from a strong gain of 3.4% in September.
The dollar rebounded from two and a half week lows after three days of declines, while Italian bond yields jumped after the European Union warned the nation’s budget deficit will move dangerously close to the economic bloc’s limit of 3%.
Donald Trump’s loss of the House of Representatives in the midterms reduced the chance of another tax cut. That in turn had analysts and money managers breathing a sigh of relief that the U.S. economy wouldn’t ultimately overheat and force the Fed to keep jacking up borrowing costs.
“We think we are close to the end of the appreciation of the dollar,” said fund manager Amundi’s Didier Borowski, who expects the Fed to pause its hiking cycle next year as the economy starts to slow. “Usually we see a year-end rally (in stocks)” he added.
The bond market there was plenty of activity too, with the 10-year Treasury note …read more