US stocks extended losses of previous day as weak economic data and corporate earnings spurred concerns about high equity valuations. The S&P 500 fell 0.5% with nine of its 10 main sectors trading lower. Rising oil prices pulled up energy stocks. The report of payrolls processor ADP showed the US created 169 thousand private sector jobs in April instead of expected 200 thousand and the productivity in the first quarter declined. Investors are concerned the weak ADP report is an indication of slowing pace of job gains ahead of the nonfarm payrolls on Friday, which may prompt the Federal Reserve to delay raising interest rates. Federal Reserve Chair Janet Yellen warned that stock valuations are high at a panel discussion in Washington DC, adding to concerns that high stock valuations will prove to be unsustainable in long term. The dollar traded lower on Wednesday as the ICE US Dollar index fell 0.7% to 94.40. Today at 13:30 CET Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is negative. The initial claims are expected to rise to 279 thousand from the previous week’s 262 thousand.
European stocks fell on Wednesday as euro continued strengthening and Janet Yellen’s comment about high stock valuations weighed on market sentiment. The Stoxx Europe 600 closed 0.6% lower at 388.68, the lowest level since early March. Bond yields continued to rise in euro-zone and the euro broke above the $1.13 level for the first time since late February. The euro has appreciated by about 7.5% against the dollar since, in mid-March, it fell to its lowest level against the dollar in just over 12 years. The strengthening of euro negatively impacts the export oriented companies of euro-zone. Greece said it made a scheduled payment of 200 million euros ($224.9 million) to the International Monetary Fund, which helped the Athex Composite gain 2.9%. But investors are still concerned that the country will run out of cash to make the scheduled payment next week unless it reaches a deal with creditors on its bailout. Today at 9:10 CET April Retail PMI for Germany, France, Italy and euro- zone will be published by Markit. Tomorrow at 7:00 CET March Industrial Production and Trade Balance will be published in Germany. The tentative outlook is positive for euro. Today elections to the UK Lower House of Parliament will be held, from which the government will be formed.
Nikkei fell 1.2 percent today to a one-month low following the sell-off on Wall Street. Exporters were weaker, with Toyota Motor Corp and Honda Motor Co both dropping 1.0 percent and Sony Corp declining 2.4 percent. Tomorrow at 0:50 CET the Monetary Policy Meeting Minutes will be released in Japan, at 1:00 CET preliminary Machine Tool orders for April will be published.
Oil prices rallied on Wednesday after official data indicated US crude stocks fell 3.9 million barrels last week, the first drop in four months. But the market continues to be well supplied, and a senior OPEC delegate said the organization is unlikely to curb output alone when it meets on June 5 without the participation of non-OPEC countries.
Gold edged lower after comments by Fed Chair Jannet Yellen that bond yields could rise when rates increase, cutting the demand for gold which offers returns only through price gains.