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Stocks Bounce Back From Edge of Bear Market

Stocks Bounce Back From Edge of Bear Market

Throughout Wall Street’s December meltdown, analysts have been saying that markets were plunging despite plenty of evidence that the United States economy remains strong and corporate profit growth is healthy.

That argument finally found listeners on Wednesday, when early reports of a strong holiday-shopping season helped lift the S&P 500 by nearly 5 percent, its best day since 2009. The Nasdaq added 5.8 percent, and the Dow Jones industrial average rose just under 5 percent. That jump, over 1,086 points, represented the Dow’s best single-session gain ever, although a number of days have eclipsed that in percentage terms.

A substantial rise in crude oil prices added to the lighter mood, as did efforts from the White House to ease up on criticism of the Federal Reserve.

The rally continued in Asia, led by Japan, where stocks on Thursday opened 3.7 percent higher.

The rebound in the United States offered investors a much-needed reprieve from a decline that had picked up speed in December. Stocks had fallen for four consecutive days through Monday, and the drop had pushed the S&P 500 to within just a few points of a bear market — defined as a 20 percent retreat from its high.

Still, the S&P 500 is on pace for its worst annual performance since the financial crisis a decade ago and is only back to where it stood on Dec. 20. Plus, the move in prices Wednesday was most likely heightened by lighter-than-average trading volume during a holiday week.

But to some traders, the move upward finally made sense.

“Fundamentally you’ve got good growth here in the States, you have reasonable growth overseas, you’re going to have record earnings in 2019 and possibly in 2020 as well, you’ve got low inflation,” said Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute. Before Wednesday’s steep rise, the market had fallen too far, Mr. Wren said, and it was ready to climb thanks to the underlying strength of the American economy.

The rally was broad-based. Only one stock in the S&P 500, Newmont Mining, fell.

Data from Mastercard showed that sales in the United States this holiday season grew at their fastest pace in six years, and investors flocked to the retail sector. Stock in the department store Kohl’s jumped over 10 percent, and shares of Amazon, which called its season “record-breaking” without offering financial details, rose more than 9 percent.

Oil prices, too, were on the move after Russia’s energy minister, Alexander Novak, told a Russian newspaper that the country would benefit from continuing to cooperate with the Organization of the Petroleum Exporting Countries on regulating production. American crude, the benchmark for oil prices, rose almost 9 percent to over $46 a barrel, and shares of large energy producers also climbed.

After leading Wall Street’s recent slide, technology stocks rebounded as well. Tech investors have had plenty of causes for concern. A slowing global economy could hurt sales, tensions are rising with China on manufacturing of devices, and privacy concerns are bringing the potential for regulation. Apple shares rose 7 percent, while stock in the semiconductor maker Advanced Micro Devices gained 7.5 percent and Facebook added more than 8 percent.

Bank stocks, which have taken the brunt of recent selling as worries grew that the United States economy was weakening, rose significantly.

The rally doesn’t mean that this year’s precipitous decline in stock prices is over. Signs of economic health that encouraged the buying are doing little to address one of stock investors’ primary concerns. They’re worried that the Federal Reserve’s decision to continue raising interest rates, even if at a slightly slower pace, will hurt the economy and corporate profits. Higher interest rates on bonds or even savings accounts make stock investments less appealing as an alternative.

The Fed announced an interest-rate increase last week and said it would continue to withdraw the support it had offered the economy in the wake of the financial crisis.

“The Fed is making a monumental mistake,” said Barry Bannister, the head of institutional equity strategy at the broker Stifel. “They do not realize how long and by how much they’ve tightened already, and until they back off the market’s going to have a very weak floor under it.”

Adding to volatility has been the possibility that President Trump would consider firing the central bank’s chairman, Jerome H. Powell, because he disagreed with Fed policy. Mr. Trump, who previously sought to hitch his political success to a rising stock market, has blamed interest-rate increases for the downturn on Wall Street.

White House officials insisted again that the president had no plans to fire Mr. Powell, news that reassured investors.

Kevin Hassett, the chairman of the Council of Economic Advisers, told reporters Wednesday morning that Mr. Powell’s job was “100 percent” safe. He echoed remarks by Treasury Secretary Steven Mnuchin and Mick Mulvaney, Mr. Trump’s incoming chief of staff, both of whom spent the weekend trying to persuade investors that the president did not plan to fire Mr. Powell. Those efforts had mostly backfired, in part because Mr. Trump continued to criticize his handpicked Fed chairman.

It also helped matters on Wednesday that Mr. Trump refrained from offering new criticism of the Fed, a marked difference from the days leading up to the Christmas holiday, when he railed against the central bank on Twitter and vowed to keep the government shut down for an extended period. In fact, for the first trading session in many days, Mr. Trump posted just one tweet: It was about his trip to Iraq.

Treasury yields rise after Fed hikes rates for the fourth time in 2018

Treasury yields rise after Fed hikes rates for the fourth time in 2018

U.S. government debt yields climbed higher on Thursday as investors digested the fourth rate hike this year from the U.S. Federal Reserve.

The yield on the two-year Treasury bond, the coupon maturity most sensitive to Fed policy expectations, rose four basis points to 2.6706 percent, while the benchmark 10-year Treasury note was two basis points higher at 2.7944 percent. Bond yields move inversely to prices.

On Wednesday, the Fed announced an increase in its benchmark interest rate by a quarter point to a target range between 2.25 to 2.5 percent, in a widely anticipated move.

The move marked the fourth increase this year by the U.S. central bank and the ninth since it began normalizing rates in December 2015. It came despite President Donald Trump’s tweets against rate hikes. On Monday, he said “it is incredible” that “the Fed is even considering yet another interest rate hike” amid the turmoil outside of the U.S.

On the data front, investors are likely to closely monitor Philly Fed manufacturing figures for December at around 8:30 a.m. ET, with the latest jobless claims data scheduled for publication at the same time.

Meanwhile, a four-week and an eight-week bill is set to be auctioned by the Treasury on Thursday. Announcements on three-month, six-month, two-year, five-year and seven-year notes are also expected.

Dow dives about 500 points to its lowest close since May

Dow dives about 500 points to its lowest close since May

Stocks fell sharply on Friday after weaker-than-expected data in China and Europe exacerbated concerns of a global economic slowdown.

The Dow Jones Industrial Average fell 496.87 points to 24,100.51, its lowest level since early May, led lower by declines in Apple and Johnson & Johnson. For the year, the Dow is now down 2.5 percent.

The S&P 500 dropped 1.9 percent to 2,599.95 — its lowest closing level since April — as the tech and health care sectors lagged. The broad index also closed down 2.75 percent for 2018.

The Nasdaq Composite pulled back 2.26 percent to 6,910.66. For the year, the tech-heavy index is now up just 0.11 percent. Friday’s losses also wiped out the gains for the week across the major indexes.

Friday also marked the first time since March 2016 that all major indexes closed in a correction, down at least 10 percent from their 52-week highs.

China reported industrial output and retail sales growth numbers for November that missed expectations. This is the latest sign shown by China that its economy may be slowing down. The data also underscored the rising risks to China’s economy as Beijing works to resolve an ongoing trade war with the U.S.

“The economic data continues to bear out growth is slowing,” said Tom Martin, senior portfolio manager at Globalt. “There is still a lot of positive positioning out there. As the data continues to slow, people are feeling less comfortable with that and start to sell.”

“Where we are is trying to measure how uncomfortable people are with their positioning,” Martin said. “There just hasn’t been any follow-through in any rally we’ve seen in the past few weeks. That’s very telling of the market.”

Industrial production in China grew by 5.4 percent for November on a year-over-year basis, the slowest pace in almost three years. Retail sales, meanwhile, grew at their slowest rate since 2003.

European shares also fell after the release of weaker-than-forecast data. The IHS Markit Flash Eurozone PMI index fell to 51.7 in December, its lowest level in four years. “New business inflows almost stalled, job creation slipped to a two-year low and business optimism deteriorated,” IHS Markit said in a release.

Stocks initially surged this week amid hopes the U.S. and China would be able to strike a permanent deal on trade. On Friday, China said it would suspend an additional tariff on U.S. autos. China also confirmed it would reduce a 40 percent charge on U.S. auto imports to 15 percent for 90 days.

But the uncertainty around the ongoing negotiations has kept investors on edge recently. Data from research service Lipper found that more than $46 billion were pulled out in a week from U.S. stock mutual funds and ETFs, the most ever.

“At this point, a lot of investors are very cautious heading into 2019,” said Yousef Abbasi, director of U.S. institutional equities at INTL FCStone. “There’s a lot of frustration among investors that have been whipsawed by this volatility.”

Volatility has picked up this quarter. This is the third decline of more than 500 points for the Dow in December, following two declines of that magnitude or greater in November and three in October.

Shares of Apple fell 3.2 percent after influential analyst Ming-Chi Kuo, of TF International Securities, slashed his iPhone shipment estimates by 20 percent.

Johnson & Johnson, another Dow member, fell 10 percent after Reuters reported the company knew about asbestos in its baby powder for decades.

The S&P 500 financials sector closed down 20.06 percent from its 52-week high, officially entering bear-market territory. The sector fell 1 percent on Friday as worries about global growth dented bank shares.

What the ‘other’ stock market is saying

What the ‘other’ stock market is saying

Ask a young Wall Street pro about the New York Stock Exchange Index and they may tell you they’re familiar with it, but that it’s no longer relevant. After all, the Standard & Poor’s 500 Index is what “everyone” follows.

“Everyone” wants to beat it and any money manager that can’t beat the S&P 500 index SPX, +0.62% in a particular year is a big loser … right?

And even if the S&P 500 isn’t all you look at, you need to look no further than the Nasdaq Composite Index COMP, +0.86% to see how the “market” is doing, right? After all, most of the cool kids — stocks — hang out on the Nasdaq. That’s where the hot tech IPOs blast off, and biotech companies with a shot at saving the world with one drug list their stocks. But the NYSE Composite Index NYA, +0.51% ? The one that simply includes all the stocks listed on the old-fogie New York Stock Exchange? Following that thing went out with knickers, black and white TV and typewriters, didn’t it?

I will admit I didn’t think much about the NYSE index myself until recently. Then, as I examined the performance of a group of stock indexes to try to summarize the current market environment, I noticed something: This year (through Nov. 19), the NYSE Index (without dividends) trails the S&P 500 Index (without dividends) by a very wide margin compared with most years. Then, with some quick number crunching by Sungarden research analyst Mark Jakupcik, I realized that 2013 exhibited the same pattern. So did 2011 (though 2012 had them about even). A table at the end of this report summarizes the data, year by year.

We looked back about three decades and found only one other time that the NYSE underperformed the S&P 500 by such a large amount. It was in 1998 and 1999, the two years preceding the dot-com bubble in stocks. That was also the last time I can recall feeling like buyers of quality companies were viewed as out of touch, and where S&P 500 performance envy was as rampant as it is today. This is a disturbing pattern to us, and while it may not portend bad times for stock investors in the very near future, it bears watching (no pun intended).

OK, so now you’re thinking that this may just be a coincidence. After all, there were probably plenty of things that happened in the late 1990s that have not occurred again until recently. It doesn’t mean history will repeat itself. But this is what we are watching: The NYSE requires much more stringent listing requirements than the Nasdaq. A lot more capital is required to maintain a stock’s listing on the NYSE, and so in general, NYSE contains more stable companies than the Nasdaq. So if the S&P 500 is leaving the NYSE in its dust, it may mean that investors are shunning high quality for lower quality. When high-fliers are in vogue at the expense of blue chips, it should catch our attention.

The S&P 500 not only contains all of the kings of the Nasdaq (you know, the cool stocks), but it also weighs its constituents by the amount of outstanding stock (aka “market capitalization”). That means that as investors’ favorite stocks are bid up in price, the weighting of those stocks gets bigger within the index. The longer that goes on, the narrower the market index gets. Back in 1999, the entire gain of the S&P 500 was accounted for by a very, very small number of holdings. But people think the “market” is up because they don’t read past the headlines. By contrast, the NYSE is equal-weighted, so the self-fulfilling prophesy that surrounds the S&P 500 Index isn’t present.

We think a preference for “popular” stocks is in progress again. It is a condition that can build silently for a while, but often ends badly, as it did after 1999. Compounding the issue today is the fact that so much money is being attracted to index funds that mimic the S&P 500. This wasn’t the case during the decades in which the NYSE and S&P 500 returns were so closely aligned. I believe this is one of the biggest factors in this recent pattern. It is like a self-fulfilling prophesy on steroids — until something reverses the tide (a disturbing piece of news, or maybe just some big money players deciding its time). Then, a snowball effect can be in play. This is what happened in the late 1990s and the early part of the next decade.

Summary: the “market” that is the S&P 500 is having a good year to date and has had a great run for this entire decade, following the bottom in early 2009. The “market” that is the NYSE is telling a different story, as are many of the other major stock indexes here and abroad. After two years of this type of behavior, it is a good idea for S&P 500 followers and anyone concerned about the impact on their wealth of the next three to five years to keep the NYSE Index in their thoughts as well.

The Nasdaq’s recent record was historic in more ways than one

The Nasdaq’s recent record was historic in more ways than one

The Nasdaq Composite Index returned to record levels earlier this week, erasing all the losses it suffered in a recent decline. But while that all-time high was, in a sense, historic — though the index has hit dozens of records over the past year — it also represented a bigger milestone than investors may have realized.

On an inflation-adjusted basis, the Nasdaq’s COMP, +0.00% recent peak allowed it to finally surpass 5,048.62, the record it touched at the top of the dot-com bubble in March 2000. It hit that milestone in late February and subsequently exceeded it, though it has since pulled back a bit.

“Adjusted for inflation, the Nasdaq is only 2.0% above the peak in 2000. That comes out to a whopping annualized return of 0.10% over the past 18 years. When someone says tech is in a bubble this chart screams that it is anything but,” wrote Ryan Detrick, senior market strategist at LPL Financial, which compiled this data.

So far this year, the Nasdaq has been by far the best performer of the major indexes. It is up 8.5% (not on an inflation-adjusted basis) compared with the 2.8% rise of the S&P 500 SPX, +0.17% . The Dow Jones Industrial Average DJIA, +0.29% is up about 0.1%.

The Nasdaq’s rally has largely come on the back of large-capitalization internet and technology companies. The technology sector is up 10.2% so far in 2018 and up 36% over the past 12 months, making it the top-performing S&P 500 sector over either period. Among the notable gainers, Amazon.com Inc. AMZN, -0.67% has rallied 36% in 2018 and Netflix Inc. NFLX, -0.82% is up 68%.

The Nasdaq’s tech-heavy focus has allowed it to avoid much of the market’s recent volatility, which came on concerns over trade protectionism and tariffs, two factors seen not having a big impact on tech.

S&P 500 books lengthiest skid of 2018 as Mueller expands Russia probe

S&P 500 books lengthiest skid of 2018 as Mueller expands Russia probe

The S&P 500 index declined for a fourth straight session, representing its longest such stumble in 2018. The broad-market index was weighed by selling in consumer-discretionary and energy and materials sectors, the weakest groups of the index’s 11, even as U.S. crude-oil futures CLJM settled higher for a second session in row. The fourth declining session marks the S&P 500‘s longest string of losses since the four-session slide ended Dec. 6, 2017, according to Factset data. Meanwhile, the Dow Jones Industrial Average [: DJIA] closed out Thursday in the green, up 115 points at 24,873, snapping its three-session skid. The Nasdaq Composite Index COMP, +0.00%meanwhile, finished lower, down 0.2% at 7,481, logging its third fall in succession. The stock market pared firmer gains in midday trade Thursday following a report that Special counsel Robert Mueller subpoenaed the Trump Organization to turn over documents, including some related to Russia, the New York Times reported Thursday, citing two people briefed on the matter.

Dow snaps three-day decline; S&P 500 has longest losing streak since December

Dow snaps three-day decline; S&P 500 has longest losing streak since December

U.S. stocks mostly closed lower on Thursday, as uncertainty surrounding President Donald Trump’s protectionist stance on trade policy weighed on sentiment, although gains in a few market bellwethers kept the Dow from a fourth straight decline. Based on preliminary closing figures, the Dow Jones Industrial Average DJIA, +0.29% rose 116 points, or 0.5%, to 24,874. Among the biggest gainers in the blue-chip average, Goldman Sachs Group Inc. GS, +0.37% rose 0.8% while McDonald’s Corp.MCD, +0.46% was up 2.1%. The S&P 500 SPX, +0.17% fell 2 points, or 0.1%, to 2,747. The day represents the benchmark index’s fourth straight daily decline, its longest such streak since December. The Nasdaq Composite Index COMP, +0.00% fell 15 points, or 0.2%, to 7,482, closing lower for a third straight session. Worries are persisting this week about a potential global trade war after Trump said Wednesday his administration will seek to trim the U.S.’s trade deficit with China by $100 billion. The announcement follows comments the previous day that he wants to impose up to $60 billion in tariffs on Chinese goods.

Nasdaq end at records, as stocks extend quarterly win streaks

Nasdaq end at records, as stocks extend quarterly win streaks

U.S. stocks wrapped up the week, the month and the quarter on a high note, with the S&P 500, Nasdaq Composite and Russell 2000 hitting all-time highs on Friday. All the main indexes posted weekly, monthly and quarterly gains.

How did stock indexes perform?

The S&P 500 index SPX, +0.37% gained 9.30 points, or 0.4%, to 2,519.36, closing at a record for the 39th time this year. The benchmark index gained 0.7% over the week and 1.9% over the month. The S&P has risen for eight consecutive quarters, gaining 3.9% since July.

The Nasdaq Composite Index COMP, +0.66% closed at a record for a 50th time this year, adding 42.51 points, or 0.7%, to 6,495.96. The tech-heavy index rose 1.1% over the week and is up 1% over the month, while its quarterly gain is 5.8%.

The Dow Jones Industrial Average DJIA, +0.11% rose 23.89 points, or 0.1%, to 22,405.09, missing its own record by about 7 points. The blue-chip index barely rose over the week—up 0.3%, but posted solid monthly and quarterly gains. Over the past month, the Dow is up 2.1% while over the quarter it rose 4.9%.

The Russell 2000 RUT, +0.14% closed at a record for a 21st time in 2017, rising 2.08 points, or 0.1%, to 1,490.86. The small-cap index climbed by 2.8% over the week and 6.1% over the month. Over the quarter, it is up 5.4%.

What did market participants say?

“The fundamental headlines in terms of market weakness don’t seem to be there right now, but valuations look a little stretched and investors may take a pause from the momentum we’ve been seeing,” said Sean Lynch, co-head, global equity strategy at Wells Fargo Investment Institute. He said the S&P 500 could retreat 5% or 6% through the rest of the year before rebounding in 2018.

“The initial move so far this year has been on pretty good earnings and pretty good fundamentals. However, a lot of stocks have had great runs and look very expensive now.” He singled out small-cap stocks as ones that “seem especially risky.”

Dow Futures Tick Higher as Markets Await Trump Tax Plan

Dow Futures Tick Higher as Markets Await Trump Tax Plan

U.S. stock futures pointed to a small rise at the open on Wednesday morning, as investors took positions ahead of an expected roll-out of the Trump administration’s plan for tax cuts.

U.S. President Donald Trump is expected to unveil his tax reform plan during a speech in Indianapolis at 3:00PM ET (1900GMT).

The plan has been developed over several months by six White House and congressional Republicans working behind closed doors and with no input from Democrats.

Republicans, who control the White House and both chambers of Congress have been unable to deliver a significant legislative win on any topic since Trump took office in January.

The blue-chip Dow futures inched up 3 points, or around 0.1%, by 6:30AM ET (1030GMT), the S&P 500 futures added 2 points, or about 0.1%, while the tech-heavy Nasdaq 100 futures added 9 points, or roughly 0.2%.

Wall Street ended mostly flat on Tuesday, but the tech sector pushed higher after four sessions of declines.

On the data front, Wednesday’s calendar includes August durable goods orders at 8:30AM ET (12:30GMT). At 10AM ET, the U.S. will release a report on pending home sales.

Besides the data, the Fed is keeping itself in the market’s sights, with several officials scheduled to speak during the day.

Minneapolis Fed President Neel Kashkari is due to give opening remarks at a conference at his bank at 9:15AM ET (1315GMT), and St. Louis Fed President James Bullard is on tap to speak at Missouri’s Truman State University at 1:30PM ET (1730GMT).

Later on, Fed Governor Lael Brainard is scheduled to take part in a Kansas City Fed forum at 2PM ET (1800GMT), and Boston Fed President Eric Rosengren is slated to talk at New York University at 7PM ET.

Odds for a December rate hike mounted after Federal Reserve Chair Janet Yellen said Wednesday that the central bank needs to continue gradual rate hikes despite broad uncertainty about the path of inflation.

Interest rate futures are now pricing in about an 80% chance of a December Fed rate hike according to Investing.com’s Fed Rate Monitor Tool, up from under 40% just a few weeks ago.

Among active pre-market movers, Nike (NYSE:NKE)’s shares dropped around 3% after the sneakers giant late Tuesday posted fiscal first-quarter earnings that beat forecasts, but its revenue was slightly below expectations.

On the upside, shares of Micron Technology (NASDAQ:MU) rose around 3% after the company posted better-than-expected fourth quarter results and guidance that exceeded estimates.

Meanwhile, Twitter (NYSE:TWTR) is set to have an up-day following the company’s announcement that it is testing out 280-character tweets, double the current max.

Elsewhere, European stocks climbed to a 10-week high, led by gains for Alstom (PA:ALSO) and Siemens (DE:SIEGn) after the two agreed to merge their rail operations. Earlier, in Asia, markets ended on a mixed note.

In currencies, the dollar built on the prior session’s gains to reach a one-month high against the other major currencies, boosted by the Fed’s hawkish rate hike outlook.

Looking to commodities, oil prices were stuck in a holding pattern, as investors looked ahead to the Energy Department’s weekly supply report at 10:30AM ET (1430GMT).

Gold prices under pressure as dollar rebounds

Gold prices under pressure as dollar rebounds

Base metals traded on the London Metal Exchange are mainly firmer this morning, Wednesday September 27, with gains averaging 0.6%. Volume has been average with 6,713 lots traded as of 06:48 BST.

This after a generally weak performance on Tuesday when the complex closed down by an average of 0.6%, with copper, aluminium and nickel’s performances looking quite bearish, while the others seemed to consolidate their positions more.

Precious metals prices are up an average of 0.4% this morning with gains seen across the board, led by a 0.7% climb in platinum prices, while gold prices are up 0.1% at $1,295.13 per oz. This after a down day on Tuesday when gold, silver and platinum prices closed off by an average of 1.6% as they gave back the gains seen following North Korea’s hydrogen bomb rhetoric, while palladium was little changed.

Precious metals prices are up an average of 0.4% this morning with gains seen across the board, led by a 0.7% climb in platinum prices, while gold prices are up 0.1% at $1,295.13 per oz. This after a down day on Tuesday when gold, silver and platinum prices closed off by an average of 1.6% as they gave back the gains seen following North Korea’s hydrogen bomb rhetoric, while palladium was little changed.

On the Shanghai Futures Exchange (SHFE) this morning, aluminium and copper prices are down 0.2% and 0.1%, respectively, with copper prices at 50,450 yuan ($7,608) per tonne, while the rest are up by between 0.3% and 0.6%.

Spot copper prices in Changjiang are down by 0.7% at 50,390-50,590 yuan per tonne and the London/Shanghai copper arb ratio has edged higher to 7.79. The fact spot prices are showing a bigger loss than the futures highlights that the spot prices were set earlier in the day and futures prices have gone on to rebound.

The recent spell of weakness in iron ore and steel rebar prices seems to be over as January iron ore prices are up by 0.7% this morning at 471.5 yuan per tonne on the Dalian Commodity Exchange, while SHFE steel rebar prices are up by 0.9%. Gold and silver prices on the SHFE are down by 0.3% and 0.5%, respectively.

In international markets, spot Brent crude oil prices are up by 0.3% at $58.73 per barrel and have been near their highest since July 2015 and the yield on US ten-year treasuries is firmer at 2.26%, while the German ten-year bund yield is weaker at 0.42%.

Asian equities are on divergent paths this morning with the Nikkei, ASX 200 and Kospi down by between 0.1% and 0.3%, while the Hang Seng is up by 0.3% and CSI 300 is off slightly. This follows a slightly weaker session on Tuesday, where in the USA, the Dow closed down by 0.05% at 22,284.32, while in Europe, the Euro Stoxx 50 dipped by 0.04% to 3,536.38. US markets are likely to be anxious today as they await news of the proposed US tax changes.

The dollar is on the rise and was recently quoted at 93.38, the rally seems to be fuelled by US Federal Reserve chair Janet Yellen’s comments supporting a gradual rise in US interest rates. The euro at 1.1746 is under pressure, as are sterling at 1.3367, the yen at 112.76 and the Australian dollar at 0.7847.

The Chinese yuan continues to weaken, it was recently quoted at 6.6373, while all of the emerging currencies we follow are similarly weaker as the dollar rebounds.

Data out today includes EU M3 money supply and private loans, UK CBI realised sales, with US data including durables goods orders, pending home sales and crude oil inventories. In addition, US Federal Open Market Committee member Lael Brainard is speaking.

The base metals are split into two camps with copper, aluminium and nickel looking vulnerable, while lead, zinc and tin prices look to be consolidating and well placed to push higher. We see the vulnerable group as correcting recent gains and looking for the level where buying re-emerges. We are not too bearish on these metals, but feel prices had run ahead of the fundamentals. We would let the pullbacks run their course, before looking to buy again.

Gold prices have been correcting recent gains, the pullback tested the break-up level at $1,295 per oz and it gave way, which is a sign of weakness. Bouts of haven buying have since given prices some lift, but the gains have not been held on to, which suggests a market that is getting tired of the ongoing rhetoric but lack of progress over North Korea. In addition, the stronger dollar is proving to be a negative for gold prices and may well be prompting stale long liquidation. We expect the North Korean saga to lead to scale-down buying.