While you were sleeping: Wall St slides, US Treasuries and oil gain

Tuesday 1st May 2018

Wall Street declined, retreating from gains earlier in the day, while oil jumped after Israel said Iran lied about its nuclear weapons program.

West Texas Intermediate crude for June delivery traded 0.5 percent higher at US$68.46 a barrel at 2.45pm on the New York Mercantile Exchange. Earlier in the day it rose as high as US$69.34.

Wall Street slipped. In 2.30pm trading in New York, the Dow Jones Industrial Average fell 0.2 percent, while the Nasdaq Composite Index declined 0.4 percent. In 2.15pm trading, the Standard & Poor’s 500 Index dropped 0.5 percent.

The Dow moved lower as declines in shares of Verizon and those of Intel, recently down 3.7 percent and 2.3 percent respectively, outweighed gains in shares of McDonald’s and those of Apple, recently up 4.3 percent and 1.4 percent respectively.

US Treasuries rose, sending the yield on the 10-year note one basis point lower to 2.94 percent.

The Federal Open Market Committee is set to begin its two-day policy meeting on Tuesday. While US policy makers are not expected to announce an interest rate hike on Wednesday, investors will eye the FOMC statement for any clues for a potential acceleration in rate increases.

Indeed, the latest data on US consumer spending and the Fed’s preferred inflation measure bolstered expectations it may raise rates more often than the total three times it has so far signalled for this year.

“The rise in real consumption in March confirms that all of the first-quarter weakness in household spending came at the very beginning of this year and that consumption growth is already rebounding,” Michael Pearce, senior US economist at Capital Economics, said in a note on Monday.

“With Fed officials confident in the near-term economic outlook, they will be more focused on the stronger than anticipated pick-up in core PCE inflation this year, reaching 1.9 percent in March,” Pearce noted. “We think that will convince the Fed to raise rates a total of four times this year, with the next hike coming in June.”

In Europe, the Stoxx 600 Index finished the day with a 0.2 percent gain from the previous close. The UK’s FTSE 100 Index gained 0.1 percent, Germany’s DAX Index rose 0.3 percent, while France’s CAC40 Index climbed 0.7 percent.

Shares of J Sainsbury jumped 14.5 percent in London after the UK’s second-largest food retailer agreed to buy Walmart’s Asda chain in a deal that values the British unit at about 7.3 billion pounds (US$10 billion).

Sainsbury said it will pay Walmart 2.98 billion pounds in cash, while Walmart will hold a 42 percent stake in the combined company.

"The retail environment in Europe is only going to get more competitive, which likely means tough negotiations” for consumer-goods producers, said Kepler Cheuvreux analyst Jon Cox, Bloomberg reported.

Shares of Walmart traded 1 percent stronger in New York as of 2.32pm.

(BusinessDesk)

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