US stocks slump on faster rate hikes concerns - 5.2.2018

US stock indices log worst weekly losses in two years

US stock indices slumped but dollar rallied on Friday as bigger than expected increase in January nonfarm payrolls stoked concerns Federal Reserve may fasten the pace of rate hikes. The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.6% to 89.155 Friday. S&P 500 fell 2.2% to 2762.13 led by 4.5% loss in energy shares. The US broad market index fell 3.9% for the week. Dow Jones industrial average sank 2.5% to 25520. The Nasdaq composite fell 2% to 7240.95. Futures on indices indicate lower opening today.

SP500

Investors are concerned lawmakers may not agree on immigration deal which is the contentious issue in budget negotiations. In case no agreement is reached by 12:00 a.m. EST Saturday the government’s funding will expire. The House passed a one-month short term spending bill Thursday that would keep the government funded through February 16 but the bill doesn’t have enough support to clear the Senate. Economic data were mixed: weekly initial jobless claims sank 41,000 to 220,000, US housing starts fell 8.2% in December while home builder permits were flat in December.

German DAX 30 leads European indices lower

European stocks retreated for a fifth straight session on Friday after Deutsche Bank posted a bigger than expected loss in the fourth quarter. Both the euro and British Pound turned lower against the dollar. The Stoxx Europe 600 index fell 1.4% posting 3.1% loss for the week. The DAX 30 slumped 1.7% to 12785.16. France’s CAC 40 fell 1.6% and UK’s FTSE 100 lost 0.6% to 7443.43. Markets opened 0.8%-1.1% lower today.

Market sentiment was boosted by the report the world’s second-largest economy grew 6.9% in 2017, above an expected 6.8% rate and the first year on year growth since 2010. China is the EU’s second-largest trading partner. And a report forecasting that US shipments of chips will reach $50.1 billion in 2021 supported chip maker shares.

Nikkei leads Asian markets lower

Asian stock indices are mostly lower today as investors turned cautious on prospect of faster tightening of Fed monetary policy after better than expected US jobs report. Nikkei ended 2.5% lower at 22686 as yen resumed strengthening against the dollar. Chinese stocks are mixed: the Shanghai Composite Index is up 0.7% while Hong Kong’s Hang Seng Index is 1.1% lower. Australia’s All Ordinaries Index is down 1.6% despite continued Australian dollar weakness against the greenback.

Brent extends losses

Oil futures prices are edging lower today following Friday sell-off on higher US output data. Prices fell Friday on rising US domestic output concerns after US Energy Information Administration report indicated US oil production exceeded 10 million barrels a day in November for the first time in nearly 50 years. April Brent fell 1.5% to $68.58 a barrel on Friday. It lost 2.2% in the week.