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US Stocks Reach Fresh Heights

Daily Analysis - 21/12/2016

Dow Jones Industrial Average Reaches Towards 20,000

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After a brief pause and pullback, US stocks are back on the climb with both Dow and Nasdaq futures closing at new records on Tuesday.  Although there are concerns about what monetary and fiscal policy will look like in 2017, the Santa Claus rally is underway as stocks push higher in the absence of major economic data.

US Stocks Continue to Climb


Following a record close on Tuesday’s session, the Dow Jones Industrial Average remains on an upward trajectory, trending just shy of the major psychological level of 20,000.  Although there are many concerns about the post-election rally and the stability of the most recent gains, recent data shows that since the November vote, money has been pouring into US stock funds at one of the fastest paces on record.  Stocks have now rallied for 6-straight weeks, notching one of the best rallies in years with Dow futures having increased 15.00% over the last 12-months with the majority of the gains arriving since November.  In keeping with the optimism, the US dollar also hit a new multi-year high on Tuesday, with the US dollar index rising to fresh 14-year highs.  Dow futures are experiencing momentum continuation on the session, trending just above 19,900.

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Turkish Rates Left on Hold


The Turkish Central Bank opted to leave interest rates unchanged during their latest meeting, keeping the benchmark one-week rate at 8.00% on Tuesday despite the rising risks to the economic outlook.  The Central Bank cited the weakness in the Lira as a potential driver of accelerated inflation over the near-term as rising energy prices contribute to the upside pressure on consumer prices.  The Lira has already lost over 17.00% year-to-date against the US dollar as tourism revenue shrinks amid a spate of terror incidents across the country.  Furthermore, moves by President Recep Tayyip Erdogan to consolidate his power further are spooking foreign investors at a time when the economy is facing a contraction combined with high unemployment and inflation.  After ending Tuesday’s session mostly flat, USDTRY is back on the retreat amid US dollar profit-taking.

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NZD Lower as Dairy Prices Trim Gains


Auction results compiled by the GlobalDairyTrade Index on Tuesday showed that the benchmark fell by -0.50% during the latest measuring period, modestly weakening the outlook for dairy farmers across New Zealand.  Although the index has undergone a significant rebound over the last 12-months, climbing over 75.00% from January lows, the latest pullback in momentum higher suggests that dairy prices may have overshot to the upside, tempering the outlook for the industry.  Besides dairy prices, the trade deficit in New Zealand reportedly narrowed during the month of November, shrinking to NZD -704.62 million from NZD -815.00 million in October.  The main drivers behind the decline has been significantly lower exports to the United States and European Union year on year.  After falling for the last 5-sessions, NZDUSD momentum lower remains intact following the latest fundamental developments.

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API Reports Larger Than Anticipating Inventory Decline


US oil futures remain in on an upward trajectory after the preliminary weekly oil inventory figures from the American Petroleum Institute.  According to the industry group, US onshore stockpiles fell by -4.150 million barrels last week, marking a significantly higher drawdown than the -2.500 million barrels forecast.  Although overall US inventories have been falling for five weeks, the surprising development has been rapidly filling inventories in the Cushing storage facility which has seen stockpiles climb for the last four weeks.  US output is likely to have experienced another pickup last week according to data due later in the session from the US Energy Information Administration as heavily indebted producers take advantage of higher prices to revive shuttered operations.  Both Brent and WTI futures are higher on the session, adding to Tuesday’s gains and trending towards multi-year highs reached back on December 12th.

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