Nasdaq Reaches New Record

Daily Analysis - 28/12/2016

Global Equities Continue Their Winning Streak Amid Low Turnover


The technology-weighted Nasdaq Composite continued to rise in Tuesday trading as better US fundamentals combined with limited market momentum saw equities push higher.  Record US home prices and high expectations heading into 2017 combined to form the basis for this last push heading into New Years.

US Home Prices At Record Highs

Data compiled by S&P Case-Shiller showed that home prices across 20 major US cities rose by 5.10% on a non-seasonally adjusted annualized basis.  Besides beating expectations of 5.00% growth, October’s growth data puts US residential housing prices at record highs, beating records reached back in 2006 before the bubble burst.  Although concerns remain as to whether the recent streak can last.

According to the Conference Board, US consumer confidence rose to 113.7 in December versus 109.4 in November, reflecting improved sentiment ahead of the inauguration of President-elect Donald Trump next month.  Equities were able to harness the optimism, with Nasdaq futures climbing to a new intraday record while the S&P 500 and Dow Jones Industrial Average also booked modest gains.


US Natural Gas Demand Sends Prices Higher

With cold weather fronts blanketing the United States over the last few weeks, natural gas prices hit a new multi-year high on Tuesday, reaching $3.872 per MMBtu.  Heightened seasonal demand for household heating has seen scorching demand over the last few weeks, with drillers taking advantage of heightened production to restore shuttered production.

According to oil and gas services giant Baker Hughes, the gas drill rig count rose by 3 rigs last week to 129 active rigs.  Although still well below the 162 rigs that were operational a year earlier, the significant gains in prices have helped embattled companies rebound.  Helping to support the gains are rapidly falling stockpiles, especially after the 209 billion cubic feet dip reported last week by the Energy Information Administration.  While slightly below Tuesday’s highs, gas prices have rebounded from earlier session lows despite remaining under pressure.


Japanese Retail Experiences a Pickup

After 8-straight months of negative growth, Japanese retail recorded a positive print on an annualized basis during the month of November.  Snapping an extended losing streak, headline retail activity rose by 1.70% during the month compared to -0.10% recorded a month prior.  Besides growth accelerating by the fastest pace since October of 2015, improving retail also paves the way for some upside in inflation after the disappointing core figures reported earlier in the week.

Adding to the optimism was industrial production rising by the most since June.  Industrial output climbed by 1.50% during November, slightly below forecasts of 1.60%, but nevertheless, displaying broadly positive momentum as industrial activity climbs at the fastest pace since 2014.  After snapping a four day losing streak yesterday, GBPJPY is extending the previous sessions gains in early European trade.


Spanish Consumption Helps Drive Economic Rebound

In another sign that the lack of a stable government has helped the Spanish economy, the latest retail figures showed the best momentum in 3-months, rising 3.30% during November versus 2.10% in November.  This acceleration in economic activity is accompanied by a quickening pace of GDP growth, inflation at the highest point since August of 2013, and unemployment which has finally retreated below 20.00% during the third quarter.

The latest retail figures point to broad-based improvements in the economy, helped in large part by especially accommodative monetary policy measures.  With trade improving on the back of a cheaper Euro, the absence of a banking crisis could prove bountiful for the Spanish economy in 2017.  In the meantime, the Euro is continuing higher momentum versus the British Pound despite very low trading volumes.


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