US stock market ended at over ten month high on Tuesday led by energy stocks as oil rose. The dollar slipped as data showed US labor productivity declined in the first quarter: the live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, was 0.16% lower at 93.831. The Dow Jones Industrial Average rose 0.1% settling at 17938.28. 2.15% rise in Chevron was the biggest contributor to blue chip index’s gain. The S&P 500 closed up 0.1% at 2112.13 less than 1% off its record of 2130.82 set May 21, 2015. 1.6% rise in energy stocks helped the broad market index end in positive territory offsetting losses in health care and financial stocks which led the decliners. The Nasdaq Composite fell 0.1% weighed by a slump in biotech stocks. In economic data the 0.6% decline in US labor productivity in first quarter was in line with expectations, and the 4.5% rise in unit labor costs in the same period was higher than expected, suggesting an uptick in wage inflation. Wage inflation is one of the main indications of building inflationary pressures Federal Reserve has mentioned it needs to see together with improved labor market for hiking the interest rates. Further indication of building wage inflationary pressure such as wage earnings growth will certainly imply a higher likelihood of a rate hike after Federal Reserve Chair Janet Yellen said that the central bank plans to raise rates as the US economy is in relatively good shape despite a disappointing May jobs report. Currently fed fund futures are pricing in less than 27% chance for a rate hike in July with less than 4% in June. Today at 13:00 CET Mortgage Applications will be released in US. At 16:00 CET April Job Openings and Labor Turnover Survey results will be published. The tentative outlook is positive for the dollar.
European stocks ended higher for the second straight session on Tuesday led by energy, basic materials and industrial shares. The euro edged higher against the dollar trading at $1.1360 late Tuesday in New York, compared with $1.1357 late Monday. The Stoxx Europe 600 ended 1.1% higher. Germany’s DAX 30 index rallied 1.7% to 10287.68 as data showed the 0.8% rise in Germany’s industrial production in April was better than expected. In other economic news euro-zone gross domestic product was revised higher to 0.6% in the first quarter from a first reading of 0.5%, driven by household spending. France’s CAC 40 added 1.2%. UK’s FTSE 100 edged 0.2% higher. Today at 10:30 CET April Industrial and Manufacturing Production will be released in UK. The tentative outlook is neutral for Pound. And at 16:00 CET the change in GDP during three months ending in May over the three month period ending in April will be published.
Asian stocks are mixed today after weak Chinese export data and a downgrade by the World Bank of its 2016 global growth forecast to 2.4% from the 2.9% estimated in January. Chinese shares are retreating with both the Shanghai Composite and Hong Kong's Hang Seng index down 0.3% as data showed China’s dollar-denominated exports fell 4.1 % in May from a year earlier compared with an expected drop of 3.6%. Nikkei gained 0.9% today erasing earlier losses despite stronger yen. A smaller than expected decline of 0.4% in China’s imports for May instead of an expected 6% fall bolstered market sentiment. Investor optimism was supported also by an upward revision to 0.5% in first quarter GDP compared to previous quarter from the preliminary estimate of 0.4%.
Today at 23:00 CET Reserve Bank of New Zealand Rate Decision will be released. The RBNZ is expected to cut the interest rates 0.25 percentage points to 2%.
Oil futures prices are rising for a third session today after closing at eight month highs on Tuesday on continued output disruptions in Nigeria. August Brent crude closed 1.8% higher at $51.44 a barrel on London’s ICE Futures exchange, the highest since October 9. Today at 16:30 CET US Crude Oil Inventories will be released by the Energy Information Agency. A drawdown in crude stockpiles is expected with the American Petroleum Institute industry group report late Tuesday indicating US commercial crude inventories fell by 3.6 million barrels last week.