S&P 500 hits new peak ahead of US-China trade talks
Meanwhile the dollar continues to slip, with the dollar index down 0.3% to its lowest since the start of the month.
Wall Street is expected to open slightly lower, with the Dow Jones futures suggesting a 25 point dip and the S&P 500 down 4 points. Even so, European markets are managing to hold onto their – slight – gains, with the UK’s leading index up 0.38%. Artjom Hatsaturjants, Research Analyst at Accendo Markets, said:
The FTSE100 is refreshingly bullish, building on the positive example set by Wall St [overnight], with considerable support from FTSE’s heavyweight energy sector after last night’s unexpectedly large build in API Oil Inventories. Lower sterling, weakened by disappointment over lack of Brexit progress, is helping many international stocks, but note that defensive shares are at the forefront of today’s positive run, hinting at a still tentative market attitude. News of Donald Trump’s potential troubles with the law over the Michael Cohen affair are so far having a rather limited impact on London shares.
European markets have managed to struggle into positive territory, but the moves are not exactly convincing. Connor Campbell, financial analyst at Spreadex, says:
With the pound reversing some of its recent growth the FTSE was able to crawl out of the red on Wednesday.
The return of Brexit concerns to the forefront of investors’ minds – inspired by Michel Barnier warning that the UK and EU were unlikely to reach the October deadline set by the European Council – undermined sterling’s recent gains. Against the dollar, which still isn’t back to its best, the pound slipped 0.2%, sending cable to $1.288, while against the euro sterling fell as much as 0.4%, leaving it at its worst price in almost a fortnight.
Oil is heading higher after a drop in US inventories, as well as on the prospect of the renewed US sanctions on Iran curtailing supplies from the third largest producer in Opec.
Last week’s fall in US stocks of 5.2m barrels announced by the American Petroleum Institute after the market closed on Tuesday was more than three times the decline expected by analysts.
The latest problems for Donald Trump will be cheered or jeered depending on your point of view, but markets seem unsettled by a threat to the US president. Joshua Mahony, market analyst at IG, explains:
Michael Cohen’s implication of Donald Trump in criminal activity may not put the president behind bars, but it has certainly riled markets, with traders shifting out of the dollar and stocks….While Trump is one of the most divisive presidents in history, markets have certainly taken to his economic expansionary policies and any threat to his second term will likely hit markets. With US mid-terms coming up in November, the continued scandal surrounding Trump’s presidency will dent confidence even though a Republican win is near-enough nailed on due to gerrymandering.
It’s not a particularly busy day for company news, but two businesses at least will be wishing they were not in the headlines.
There is yet another problem for Ryanair, which has been sending out compensation cheques with no signatures. Unsurprisingly, these have bounced.
European markets are drifting rather aimlessly at the moment, lost in a summer lull despite Wall Street’s new records, the US-China trade talks and the political developments in the US.
The FTSE 100 is virtually flat, down just 0.07%, while both Germany’s Dax and France’s Cac have edged into positive territory.
The expected dip in US markets looks like the right reaction to the latest Trump travails, says Paul Donovan at UBS:
US President Trump faces either double trouble (Cohen and Manafort) or a witch hunt, depending on your perspective. Does this matter for markets? It might matter if the president’s political capital with Congress was undermined, affecting policy. However, the president does not have that much political capital with Congress, and is not asking Congress to pass laws they do not want to pass. It might matter if markets think the politics will change the midterm election results (or the risks around those results), and thus policy. However, Republicans may successfully try to separate themselves from Trump. Trump supporters may be motivated to turn out and vote. This impact on midterms is not certain. It might matter if trade policy is used to distract attention from the domestic politics. The US president has considerable authority over trade, and taxing US consumers via trade tariffs can be made to serve the “Make America Great Again” slogan. Overall, the muted market reaction seems appropriate.
US markets are set to open lower but this will not prevent the record bull market run. Michael Hewson, chief market analyst at CMC Markets UK, says:
The divergence in US markets continued overnight with a marginal new record high for the S&P 500, as well as new records for the Russell 2000 and the Dow Jones transportation index, before slipping back into the close, but still on course for the longest bull market run in history.
This failure to push on higher, as buying momentum stalled, along with the news that President Trump’s former lawyer, Michael Cohen, pleaded guilty to violating campaign finance laws by arranging hush payments to two women Trump was alleged to have had affairs with, could well see investors look to take some profits today after a fairly mixed session in Asia and a lower open in Europe.
Meanwhile Trump may have played down the prospects of early progress in the US-China trade talks, but a spokesman from China’s foreign ministry said it hoped there would be a good outcome.
Despite the record breaking run on Wall Street, European markets have opened lower as investors take note of the latest political developments in the US which could cause problems for president Trump.
The FTSE 100 is currently down 0.24%, Germany’s Dax is down 0.23%, France’s Cac is off 0.08%, while Italy’s FTSE MIB is 0.33% lower.
The previous record bull market for the US ran from October 1990 to March 2000 and encompassed the dotcom boom – and ended with that bubble bursting. Laith Khalaf, senior analyst at Hargreaves Lansdown, says:
The US market has now been on a rampant charge since March 2009 with only a few blips along the way.
Many question whether this exceptional period for the US stock market is going to end in tears, though the very fact this issue is so widely raised suggests we are not in the throes of the irrational exuberance of the late 1990s.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
US markets continue to hit new highs, with the S&P 500 reaching a record intra-day high of 2873.23. It also equaled its longest ever bull market run of 3,452 days, helped by strong corporate earnings – not least from technology stocks – and hopes that a trade war between China and the US can be avoided. Talks are due this week between representatives of the two sides, even if President Trump has played down the prospects of any imminent success.
August has been a remarkable month so far for US equities. Apple became the first trillion-dollar company, the S&P reached a remarkable milestone, touching a fresh intraday high and today this current bull run will break a record for its duration.
Yet despite the numerous records and positive close on Wall Street, Asian markets and European futures moved lower, tracing US futures lower, in response to heightened US political risk. In a catastrophic day for President Trump, his personal lawyer Michael Cohen pleaded guilty, possibly implicating the US President on legal issues and Trump campaign chairman Paul Manafort was also convicted; events which have understandably unnerved investors. The overriding fear here is that something could come out linked to Trump. US domestic political issues are in danger of overshadowing the revival of the US- Chinese trade talks.