On Monday November 20, 2017, the equities of global markets rose as economic growth boosted confidence of investors and helped them push aside concerns about the collapse of a government alliance following discussions in Germany. However, the same news prompted the euro to drop against the dollar.
In the recent signs of a global increase, Germany’s central bank announced that its economy is expanding into the conclusion of Q4. This follows a robust industrial activity, and companies are seeking to find workers that will fulfill orders.
As part of the progress story, the Conference Board’s top economic index for the U.S increased by 1.2% in October, or twice the rates previously polled by Reuters’ economists.
However, investors downplayed the political stalemate in Germany as the leading United States economic indicators further revealed signs of a comparatively strong economic data and an economy with promising traction, said the chief investment strategist at State Street Global Advisors, Micheal Arone.
He also said that the battle among investors in the U.S. congress, over their positions the recent tax reform efforts has exposed the market in an undecided position. “It doesn’t look like the market can proceed in any direction. It is almost like a case of two steps forward, one step back,” the chief strategist concluded.
In Germany stocks, the DAX benchmark .GDAXI closed at 0.50% up. The pan-European FTSEurofirst 300 INDEX .FTEU3 of major regional stocks increased by 0.63% and MSCI’s measurement of stocks worldwide .MIWD00000PUS grew by 0.05%.
Still on global stocks, the Dow Jones Industrial Average .DJI increased by 72.09 points, that is 0.31%, to 23,430.33. The Standard & Poor 500 .SPX added 3.29 points- 0.13%- to 2,582.14 and the Nasdaq Composite .IXIC gained 7.92 points, or 0.12%, to 6,790.71.
In nearly one week, while the euro lost value, the dollar reached its highest against several currencies. This comes after the German Chancellor, Angela Merkel’s inability to secure a 3-way coalition. She also said she would rather have new election than rule with a minority.
The rundown of discussions between Angela Merkel’s conservative bloc, the liberal, the environmentalist Greens, and the pro-business Free Democrats (FDP) increases the likelihood of new elections and dampens her future after being in power for over 12 years.
The news highlighted “a major risk issue” for the European single currency, according to senior business strategist at Western Union Business Solutions, Joe Manimbo.
“With the fallen favour of the Euro, following the ugly can of worms that have been opened in Europe, the dollar appears to be leveraging it despite its own political travails,” said Manimbo.
To demonstrate this, the dollar index .DXY appreciated to 94.074- its best position since November 14.
Conversely, the euro collapsed to $1.1720 in overnight trading after the news of the failed coalition talks broke. It plunged against the Japanese yen to 131.16 yen EURJPY=, its lowest since September 15.
However, the Japanese yen weakened 0.48% vs the dollar at 112.61 to $1.
Oil prices dropped too, extending the poor currency performance ahead of a meeting of OPEC countries next week, as the dollar’s revival affected other commodities negatively.