Us Stocks Open Up After Asian Upturn, Dollar Advances

Us Stocks Open Up After Asian Upturn, Dollar Advances

The US stock market opened strongly on Monday morning, with the Dow Jones gaining 111 points or 0.63% to 17,824 after the open, while the S&P 500 index rose the same percentage to 2076.1.   

Us Stocks Open Up After Asian Upturn, Dollar Advances
Us Stocks Open Up After Asian Upturn, Dollar Advances

Sentiment was helped by sharp gains seen in Asian stock markets overnight, following weekend indications from the People’s Bank of China that further easing could be on the cards should inflation continue to drop.

There was also encouragement to be had from some robust US personal income and outlay data for February. Personal income rose 0.4% last month, another healthy result following the same rise in January (originally reported as 0.3% but upgraded in today’s report). The improvements in income are not fully filtering through to spending, though outlays did improve slightly: consumer spending rose 0.1% in February, after a 0.2% decline in January.

Inflation continues to look very tame, though. The PCE price index increased 0.2% (just 0.1% at the core level), which takes the year-on-year change to 0.3%. This is a pick-up in the annual change from the 0.2% seen in January, but remains woefully short of the Fed’s target.

The euro weakened against the dollar in early trading Monday, despite the release of some upbeat indicators for Europe’s economies.  German consumer inflation came in higher than expected for a second-consecutive month, rising 0.5% in March, against a consensus estimate of 0.4%. The year-on-year change increased from 0.1% in February to 0.3% in March, reaching its highest since last November.

This pick-up in consumer prices in Europe’s most important national economy will boost hopes of a lift in inflation for the eurozone as a whole – we’ll find out how things stand early on Tuesday with the release of the flash reading for March of the Harmonized Index of Consumer Price (HICP) for the European Union, though the last few results have been languishing in deflationary territory.

The European Commission’s index of economic sentiment, which gauges both consumer and business attitudes, climbed 1.6 points to a better-than-expected 103.9, led by improvements in industry sentiment rather than at the consumer level. Expectations of a pick-up in inflation shown in the report will also come as welcome news.

By 9am in New York, the euro was down 0.47% against the dollar, though the move seems more down to strength in the latter rather than euro weakness, as the dollar has made broad advances against its major peers. GBP/USD fell 0.63%, USD/JPY rose 0.61% and USD/CAD gained 0.34%.

The gains against the Loonie came in spite of a sharp up-turn in Canadian industrial product prices last month driven by the recovery in petroleum prices. The Canadian Industrial Product Price Index (IPPI) jumped 1.8% in February, while January’s result was revised up slightly from -0.4% to -0.3%. Based on this result, and the rebound in energy prices seen recently, some firming in Canadian inflation can be expected, though probably not enough just yet to alter the Bank of Canada’s monetary policy. Canadian GDP data for January will be released on Tuesday morning.

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