Fundamental Analysis

US Stocks Post Strong Gains, Dollar Down

June 7, 2018
Equities
US stocks rose for the fourth straight session lifted by the financial sector and the ease of trade tensions. JP Morgan, Citigroup, Morgan Stanley, and Wells Fargo gained more than two percent as the US Treasury Yields reached almost a two-week high. Dow Jones climbed 1.4% to reach the highest level since March 13th. SPX500 added about 0.9% percent to extend its winning streak to four days and trade near a three-month high. The Nasdaq ended the session with a record close for the third consecutive day. The Chicago Board of Exchange Volatility Index, VIX, dropped by 6.13% to 11.64 to trade near the lowest levels since late January. Investors fear of a trade war between China and US eased as China confirmed that it doesn’t want the trade friction between the two great economies to escalate.
USD
The dollar fell for the third consecutive day against major peers, the dollar index retreated more than 1.6% from its seven-month high. Despite the positive economic outlook from the United States and the high expectations of a rate hike in the next Federal Reserve meeting, investors seem to exit their long dollar positions. The Trade Balance deficit in the United States narrowed for the second consecutive month. The Trade Balance deficit for February was at 57.60 billion dollars whereas April’s reading came out at 46.20 billion dollars. The weekly Initial Jobless Claims will be released today.
EUR
The Euro extended its gains against its rivals as investors weigh the outcome of the European Central Bank meeting next week. On Tuesday, Bloomberg reported, citing ECB officials, that the bank will consider announcing its tapering schedule to the public in its meeting on June 14th. Also, Peter Praet, the ECB’s chief economist stated yesterday that the ECB would discuss next Thursday whether to terminate its bond purchasing program later this year. The preliminary Consumer Price Index for May came out higher than expected last week, to ease the concerns of low inflation. All the mentioned factors were supportive of the single currency. The Eurozone GDP for the first quarter is due today.
Gold
Gold prices ended the day almost unchanged despite a weaker dollar. The gains of the US stock market and the rise of the US treasury yields are reducing investor’s appetite for the precious metal. Gold has been trading in a tight range for the past three trading weeks.
Oil
West Texas Intermediate fell yesterday to erase Tuesday’s gains. The Energy Information Administration reported that the US crude oil inventories rose by 2.072 million barrels last week. The spread between the US crude oil and the Brent Oil rose to more than $11 a barrel, the highest since March 2015, due to the booming US shale production. The United States took advantage of this spread as the US oil exports jumped to a record of 1.76 million barrels per day in April.

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