Wednesday May 25th

25-05-2016

Wall Street looks to resume rally after Greek accord; oil rises

U.S. stock index futures indicated a higher open Wednesday, continuing a "risk-on" rally in global indexes after positive economic data, rising oil prices, and a new debt deal for Greece. U.S. stocks posted their best day since March on Tuesday with gains of more than 1 percent, following encouraging reports on the housing market. But the positive news continued overnight with euro zone finance ministers agreeing with Greece and the International Monetary Fund (IMF) on what they called a "breakthrough" deal that will address Athens' requests for debt relief. European stocks were trading higher on Wednesday morning with Asian shares also posting gains overnight. Japan's Nikkei 225 closed up 258.59 points, or 1.57 percent, at 16,757.35, with shares receiving an additional boost from a relatively weaker yen against the dollar. Across the Korean Strait, the Kospi advanced 22.83 points, or 1.18 percent, to 1,960.51. In Hong Kong, the Hang Seng index ended up 537.62 points, or 2.71 percent, to 20,368.05. Down Under, the benchmark S&P/ASX 200 closed up 76.94 points, or 1.45 percent, at 5,372.51, led by gains in the heavily-weighted financials subindex, as well as the energy and materials sub-indexes. Chinese mainland markets gave up morning gains to close lower, with the Shanghai composite down 6.38 points, or 0.23 percent, at 2,815.27, and the Shenzhen composite lower by 4.37 points, or 0.24 percent, at 1,800.22. "Anyone tiring of the sideways moves in equity indices should be thrilled. We have finally broken out of the range and despite some technical signals to the contrary, the move has been to the upside," Brenda Kelly, the head analyst at London Capital Group, said in a note. "Yesterday's surprisingly good new home sales data out of the U.S. was something of a catalyst – but I would not rule out this being a temporary squeeze before the next leg down for U.S. indices." On Wednesday, earnings are due from Costco and NetApp, among others. The U.S. advance April goods trade deficit was $57.53 billion, Reuters said. The Federal Housing Finance Agency's house price index at 9 a.m. ET. Also on Wednesday, the U.S. Energy Information Administration oil and fuel releases inventory data at 10:30 a.m. EDT. Meanwhile, investors will also monitor comments from Federal Reserve members for more hints on when the central bank could next raise rates. Philadelphia Fed's Patrick Harker is due to speak at 9 a.m. ET, Minneapolis Fed President Neel Kashkari will speak at 11:40 a.m. ET and Dallas Fed President Rob Kaplan will talk at 1:30 p.m. ET. Overnight, St. Louis Fed President James Bullard told CNBC that a U.S. Federal Reserve rate hike in June or July wasn't set in stone, but labor data suggested it was time to pull the trigger. "There's no reason to prejudge June," Bullard said, adding that the Federal Open Markets Committee would look at the data and decide then. Oil rose towards $50 a barrel on Wednesday for the first time in seven months, driven by expectations that shrinking supply will help erode any overhang of unwanted crude, particularly after industry data showed a sharp fall in U.S. inventories. A series of outages around the world, such as wildfires in Canada and a spate of violence in Nigeria's oil-producing region, has helped cut global oil supply by nearly 4 million barrels per day this month. Although these hitches are temporary, they have contributed to a drop in the supply glut that has plagued the market for nearly two years. Brent crude futures were up 65 cents at $49.26 a barrel by 7:13 a.m. ET (1113 GMT), while U.S. crude futures rose 58 cents to $49.20 a barrel. Gold fell to a seven-week low on Wednesday after upbeat U.S. home sales data in the previous session boosted expectations that the Federal Reserves will press ahead with interest rate hikes in the near term. The metal has fallen more than 4 percent since Fed meeting minutes last Wednesday revived expectations for an imminent rate increase. Gold is sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding assets. Spot gold was down 0.28 percent at $1,223.11 an ounce, off an earlier low of $1,220.24. U.S. gold futures for June delivery were down $5.80 at $1,223.40.