Weekly Market Review 3.2.2017 by Capital Investment Brokers Ltd. - CIBFX
A good trading week over the US permeated after Dow Jones closed at 20,000 level. Other US indices also struck record highs, which mean that the US is expecting results of a better economic outlook and positive sentiments among investors. European stocks are waiting for the release of reports on earnings before any significant movement and decision could be made. Asian stocks, especially the Japanese indices, are performing well, but China’s economic outlook is viewed on the pessimistic side.
US Trend Kick-off
Dow Jones really kicked-off upon reaching 20,000 by Thursday and closing at 20,093.78, with a +1.3% change. The same also reflected with S&P 500 and NASDAQ, closing in at record high with 2,294.69 (+1.0%) and 5,660.78 (+1.9%). Russell 2000 favorably closed at 1,370.25 as well. The said figures were attained after a positive earnings report was released and investors were feeling optimistic towards the US economy.
Record highs and impressive figures are not the only factors to be considered here, but as an investor, sustainability should be noted as well. The economic policies that would be implemented under the current administration aims to improve economic spending and ease up on tax burdens among businesses. Note that such policies would not take immediate effect, as this would take time--until late this year or the coming 2018. In addition, the market would pose more volatility as every economic policy to be implemented would either be a hit or miss. It could also be divisive and downward and not beneficial at all. Record highs are not a guarantee of continuous rise, but just the start of a cautious trading effort. Be mindful of selling when the trend continues. Sticking to the strategy is the best action to take.
The European Market is on a Waiting List
Brexit is in full force despite the Supreme Court’s ruling that the parliament has a vote about starting action on Article 50. The issue regarding Brexit’s economic impact has not yet reflected, based on the 0.6% growth in the Q4 GDP and an overall rate of 2% for the year 2016. Prime Minister Theresa May would meet with US President Donald Trump for a discussion on trade agreements. In relation to the SC Ruling, she said that the said rule would not affect the Brexit process.
European earnings are expected to be published in the coming weeks; thus, the European market is not quite as volatile as it appears to be. US President Trump’s economic policies have a big influence on how the European market reacted towards its business growth-filled agenda. In other related matters, Stoxx 600 closed a record high based on its 11-week trading.
Asian Markets were Mixed
Japan performed well where Nikkei 225 closed at 19,467.40, up by 1.7%. Exports recorded a 5.4% increase from last year despite US President Donald Trump’s withdrawal from the Trans-Pacific Partnership last Monday. Governor Haruhiko Kuroda of Central Bank is optimistic that global economy would recover and Trump’s withdrawal would not affect Japan’s economic trade.
China is rating negatively as the country is on the verge of a financial crisis, with its economic growth relying on credit. The country’s short-term growth focus puts it in a substantial position to make its economic growth go at a slow rate. Thus, the country should consider a lot of options to sustain quality growth and push consumption and services.
Canada is up for renegotiation with NAFTA where the possibility of keeping its interests first before Mexico’s is what’s circulating around. This means that Mexico is on its own in terms of bargaining on how the trade practices would push the US.
The EUR/USD exchange rate closed at 1.0699, with a 0.0015 change from last week.
Oil closed at $53.12 per barrel (+1.3%) while gold is at 1,193.70 down (+1.2%) compared to last week.