- The S&P 500 advanced 0.9% yesterday, with Financials rising 1.6% ahead of the release of the Federal Reserve’s stress test results. Tech stocks also gained 1.3%, rebounding from Tuesdays weakness.
- US bond yields continued to tick higher yesterday, with the yield on the 10-year bond rising 3bps. Oil prices also extended recent positive momentum, closing 1.4% higher on the session.
- The Federal Reserve announced after the market close last night that all 34 US banks subject to stress testing have passed the second round. As a result, banks will be able to boost dividends and/or increase share buybacks, returning capital to shareholders and providing a further boost to sentiment.
- This led to a strong after-market move for Financials, with JP Morgan, Morgan Stanley, Bank of America, and American Express all gaining over 2% in after-market trading. Financials are now the best performing sector in the S&P 500 over the past month.
- European equities underperformed their US peers yesterday, declining 0.1%.
- A Bloomberg story released yesterday citing that senior ECB officials said investors had misunderstood positive comments from Mario Draghi on Tuesday led to sharp moves in the euro. The common currency initially fell into negative territory, at one point declining 0.7%, before quickly recovering losses to settle 0.6% higher for the session.
- The euro has strengthened further overnight, rising to $1.14 against the dollar, its highest point in over a year.
- Elsewhere in FX markets, comments from BoE governor Mark Carney sent sterling 1.2% higher against the dollar. Carney said that policymakers could lift rates if business investment rises. UK bonds yields rose 4bps (prices fell) following the speech.
- The upbeat US session carried on into Asia overnight, with equities gaining 0.5%. Japanese stocks finished 0.4% higher, with Materials and Financials gaining over 1% to lead advancers.
Source :Goodbody Asset Management
Thursday 29th June 2017