US House of Representatives Passes GOP Tax Cut Bill

Daily Analysis - 17/11/2017

Wal-Mart and Cisco Earnings Power Dow Futures Rally

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US equities rallied on Thursday, rebounding from two straight losing sessions after Wal-Mart and Cisco Systems reported strong quarterly results, causing shares to spike while driving gains in the retail and tech sectors. In addition, Wall Street hailed a key vote on tax reform, helping Dow futures add 0.70% on Thursday.

US Investors Digest Upbeat Earnings and Economic Data


As US third quarter earnings enter the home stretch, strong results from key multinationals helped the Dow reverse higher from a recent losing streak.  Wal-Mart posted better-than-expected third quarter earnings and revenue, sending shares 11.00% upwards to a record high. In addition, Cisco earnings and revenue easily topped Wall Street estimates amidst robust sales of software applications, causing shares to pop 5.20%. Apart from earnings, the US House reached a milestone on Thursday after passing a bill aimed at overhauling the country’s tax code. If the bill materializes into law, it would immediately reduce the corporate tax rate to 20.00% from the existing 35.00%.  Expectations of tax reforms had helped US stocks scale all-time highs recently. However, before Thursday's rebound, major equity benchmarks declined amid investor concerns about the form of tax reform.  Dow futures are trending mostly flat near 23415 following the prior session’s rally back above 23400.

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UK Retail Sales Record First Annual Dip Since 2013


British consumers struggled with steadily rising prices and stagnant wages, with the country’s October annualized retail sales figure recording its first year-on-year decline since 2013. According to figures from the Office for National Statistics, sales decreased by -0.30% last month from a year earlier, outperforming the consensus forecast of economists anticipating a drop of -0.60% on the year. While the latest figure was also distorted by the very strong performance by retailers in October 2016, the ONS cited milder weather conditions as the rationale behind shoppers postponing purchases of winter clothes. Looking at the three months to October, which smooths out the monthly volatility, sales grew by 0.90% compared to a 0.70% uptick during the July-September period. The EURGBP pair is trading marginally higher around 0.8920 after Friday’s Asian session.

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ECB’s Cautious Stance Vindicated Following Fading Inflation


Figures unveiled by the latest Eurostat reported highlighted headline inflation in the Euro Area easing back by 0.10% to 1.40% in October, matching expectations as the core-inflation figure slumped to 0.90%. The most recent price data comes almost a month after the European Central Bank announced it will cut the size of its quantitative easing program from €60 billion per month to €30 billion from January until at least September of 2018, missing markets estimates expecting the ECB to achieve a full exit from bond buying by next September. As such, last month’s comments that asset purchases may continue were widely viewed as dovish. At 1.40%, headline CPI is below the ECB’s 2.00% target, and should help to vindicate the European Central Bank for having taken a more cautious stance towards the outlook. CAC 40 are modestly lower on the session after futures finished Thursday’s session at 5338.

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Dollar Weakness Sends Gold Higher


Bullion prices gained ground overnight as the dollar weakened following a media report that federal investigators probing possible Russian meddling in last year’s election had subpoenaed President Trump’s campaign for election-related materials. The Wall Street Journal revealed late last night that Special Counsel Robert Mueller’s team had last month issued a subpoena to over a dozen officials for documents containing specified Russian keywords. Both the White House and the special counsel’s spokesperson refused to comment on the report. However, the report was enough to send investors scurrying towards haven assets, helping XAUUSD touch a high of $1284.05 per troy ounce in early Friday trade before pulling back ahead of the European open. Gold prices could continue to drift sideways as rising US interest rates keep a lid on bullion’s investment demand unless another flight-to-safety event emerges.

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