U.S. stocks rise on Fed sentiments; Dow hits record high, up 0.82%

U.S. stocks rose on Wednesday on sentiments that the October jobs report due out on Friday won't come in strong enough to prompt the Federal Reserve to consider winding down stimulus measures.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.82% at a record-high 15,746.88, the S&P 500 index rose 0.43%, while the Nasdaq Composite index fell 0.20%.

Stocks rose despite an relative lack of market-moving news on Wednesday, mainly due to expectations that Friday's October jobs report will reveal modest improvements taking place in the labor market though not enough to convince the Fed to begin tapering stimulus programs.

Extraordinary accommodative policy tools such as the Fed's USD85 billion in monthly bond purchases drive down borrowing costs to spur recovery, boosting stock prices in the process.

The Federal Reserve has said it will pay close attention to economic indicators before deciding when to taper the pace of its monthly asset purchases, and in recent weeks, economic indicators have painted a picture of a U.S. economy moving along the road to recovery though still in need of a monetary crutch from the Fed.

Analysts are predicting the Labor Department to reveal the U.S. economy added a modest 125,000 nonfarm payrolls in October.

Leading Dow Jones Industrial Average performers included Microsoft, up 4.13%, UnitedHealth, up 2.28%, and Chevron, up 2.24%.

The Dow Jones Industrial Average's worst performers included Pfizer, down 0.91%, Nike, down 0.56%, and Boeing, down 0.35%.

European indices, meanwhile, finished largely higher.

After the close of European trade, the EURO STOXX 50 rose 0.61%, France's CAC 40 rose 0.79%, while Germany's DAX 30 rose 0.35%. Meanwhile, in the U.K. the FTSE 100 finished down 0.08%.

On Thursday, the U.S. is to publish a preliminary estimate of third-quarter gross domestic product. Meanwhile, the Labor Department is to release its weekly report on initial jobless claims.

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Forex - Dollar falls as euro rallies on data, ECB expectations

The dollar softened against most major currencies on Wednesday amid expectations that that European Central Bank will hold off on trimming interest rates at a policy meeting that concludes Thursday, especially after better-than-expected manufacturing data out of Germany published earlier

In U.S. trading on Wednesday, EUR/USD was up 0.35% at 1.3523.

The euro firmed on reports that ECB sources said the monetary authority was unlikely to cut rates at its monthly meeting on Thursday despite soft pricing and employment data hitting the wire in recent weeks.

Earlier Wednesday, data revealed that factory orders in Germany, Europe's largest economy, rose 3.3% in September, far surpassing expectations for a gain of 0.5% and were also up 7.9% on year, which sparked demand for the euro that came at the dollar's expense.

Elsewhere, revised data revealed that the final reading of the euro zone’s services purchasing managers’ index ticked down to 51.6 in October from 52.2 in September but was still higher than a preliminary estimate of 50.9.

Capping the euro's advance and supporting the greenback somewhat, however, was a separate report showing that euro zone retail sales fell 0.6% in September from August, more than market calls for a 0.4% contraction.

On a yearly basis, euro zone retail sales rose 0.3%, missing consensus forecasts for a 0.7% expansion.

The greenback was down against the pound, with GBP/USD up 0.25% at 1.6082.

The Office for National Statistics said earlier that U.K. manufacturing production rose 1.2% in September, beating expectations for a 1.1% increase and also up 0.8% on a year-over-year basis, beating forecasts for a 0.7% annual gain.

The ONS said industrial production rose 0.9% in September, compared to expectations for a 0.5% increase and was 2.2% higher than in the same month last year.

A day earlier on Tuesday, data revealed that the U.K. construction purchasing managers’ index rose to 59.4 last month, the highest level since September 2007, from 58.9 in September. 

Analysts were expecting an unchanged reading.

Also on Tuesday, data showed that activity in the U.K. services sector expanded at its fastest rate in 16 years in October.

Markit said the U.K. services purchasing managers index rose to 62.8 in October up from 60.3 in September, the sharpest rise in activity since May 1997. Economists had been expecting the index to tick down to 59.8.

The dollar was down up against the yen, with USD/JPY up 0.17% at 98.67, and down against the Swiss franc, with USD/CHF down 0.20% at 0.9118.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.36% at 1.0416, AUD/USD up 0.22% at 0.9528 and NZD/USD trading up 0.26% at 0.8386.

Investors shrugged off data showing that the number of new building permits issued in Canada rose 1.7% in September, below expectations for a gain of 6.0%.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.30% at 80.55.

On Thursday, the U.S. is to publish a preliminary estimate of third-quarter gross domestic product. Meanwhile, the Labor Department is to release its weekly report on initial jobless claims.

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Forex - GBP/USD gains on advancing U.K. manufacturing data

The pound strengthened against the dollar on Wednesday after U.K. manufacturing beat expectations a day after a separate report recorded a pick-up in U.K. construction activity.

In U.S. trading on Wednesday, GBP/USD was trading at 1.6080, up 0.23%, up from a session low of 1.6042 and off from a high of 1.6118.

Cable was likely to find support at 1.5903, Monday's low, and resistance at 1.6208, the high from Oct. 28.

The Office for National Statistics said earlier that U.K. manufacturing production rose 1.2% in September, beating expectations for a 1.1% increase and also up 0.8% on a year-over-year basis, beating forecasts for a 0.7% annual gain.

The ONS said industrial production rose 0.9% in September, compared to expectations for a 0.5% increase and was 2.2% higher than in the same month last year.

A day earlier on Tuesday, data revealed that the U.K. construction purchasing managers’ index rose to 59.4 last month, the highest level since September 2007, from 58.9 in September. 

Analysts were expecting an unchanged reading.

Also on Tuesday, data showed that activity in the U.K. services sector expanded at the fastest rate in 16 years in October.

Markit said the U.K. services purchasing managers index rose to 62.8 in October up from 60.3 in September, the sharpest rise in activity since May 1997. Economists had been expecting the index to tick down to 59.8.

The numbers bolstered the pound over the dollar, as many investors avoided the greenback to wait for the U.S. Bureau of Labor Statistics to release its October jobs report on Friday.

The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP up 0.08% at 0.8407 and GBP/JPY up 0.45% at 158.74.
The euro firmed on reports that ECB sources said the monetary authority was unlikely to cut rates at its monthly meeting on Thursday despite soft pricing and employment data.

Separately, factory orders in Germany, Europe's largest economy, rose 3.3% in September, far surpassing expectations for a gain of 0.5% and were also up 7.9% on year.

Elsewhere, revised data revealed that the final reading of the euro zone’s services purchasing managers’ index ticked down to 51.6 in October from 52.2 in September but was still higher than a preliminary estimate of 50.9.

On Thursday, the Bank of England is also to announce its benchmark interest rate.

The U.S. is to publish a preliminary estimate of third quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. Meanwhile, the Labor Department is to release its weekly report on initial jobless claims.

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