SP 500 Logs Longest Winning Streak Since 2013

Daily Analysis - 09/10/2017

US Stocks Continue to Rally as Tax Reform Proposal Gathers Momentum

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The S&P 500 recorded its eighth straight quarterly gain, marking the longest winning streak since 2013 after being buoyed by a batch of better than expected economic data points that suggest hurricanes failed to dent activity. The British pound was the other notable mover of the week, slipping sharply due to Prime Minister May’s increasingly fragile position amidst Brexit negotiations.

Last Week


The main event of the week just passed was the official US jobs report displaying a -33,000 drop in September nonfarm payrolls. While the number appears concerning on the surface, it was significantly smaller than the decline of -80,000 forecast by economists. The unemployment rate slid to a fresh 16-year low of 4.20%, signalling that the labour market continues to operate at or below “full employment,” while average hourly earnings rose by 2.90%. Separate data from the Institute for Supply Management revealed US factory activity at its highest level in September since 2004. An unexpected impact of the hurricanes was a surge in last month’s auto sales as US consumers replaced vehicles damaged by storms.

Across the Atlantic, the Pound tumbled to a one-month low against the US dollar after rumblings of a plot by Tory members to oust Prime Minister Theresa May burst into the public domain. The Euro was also under pressure against the greenback following last weekend’s Catalan independence referendum. The violence during the polls and the Spanish King’s uncompromising television address unnerved investors, with all eyes now set on the separatists. Shifting gears, the Reserve Bank of Australia kept its benchmark interest rate steady at a historical low of 1.50% while offering little hope of any policy tightening before 2018.

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The Week Ahead


The upcoming week is relatively light on the economic data front. US inflation and retail sales figures are forthcoming, while trade data and industrial output will be the focus in other markets. The first major US announcement is due on Wednesday, when the Federal Reserve is scheduled to release minutes of its September policy meeting. With the odds of a December rate rise currently hovering around 90.00%, the FOMC minutes are unlikely to yield much of a reaction. Consumer prices and a retail sales report for September are scheduled to unveiling on Friday. The annual Consumer Price Index is forecast to edge higher to 2.00% from 1.90% while core CPI is projected to rise to 1.80%.

From the Euro Area, August industrial production is predicted to expand by 0.50% month-on-month, following a sluggish 0.10% gain a month earlier. However, a bigger market mover could be European Central Bank President Mario Draghi’s speech at the Peterson Institute in Washington on Thursday. With the Central Bank’s October 26th policy decision approaching, investors will be tuning in to gather fresh insights regarding asset purchases and projections. In China, monthly trade figures will be published on Friday, with exports forecast to grow by an annualized rate of 8.80% alongside an import expansion of 13.50%.

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