Dow Jones Rallied To Record 27,000 Points, European Stocks Rise On China Export Data

Wall Street cheers on Dow Jones setting a record high above 27,000 points

On Wall Street, Dow Jones Industrial Average rallied to a record high on Thursday to set the mark of 27,000 points. Dow settled the day 227.88 points high at record 27,088.08 points.

The rally in blue-chip benchmark index was hugely led by the healthcare sector stocks that were seen riding the wave of positive market sentiments after the White House plucked its own proposal to eliminate drug rebates that drugmakers give to middlemen in Medicare. In a separate ruling, Federal Judge revoked the Trump administration plan that required drugmakers to put list prices in television ads.

Both, price disclosure and the rebate plan outlines President Donald Trump strategy to win the heart of US voters by curbing sharp rising drug costs, at the time United States is heading to 2020 elections. If the rebate proposal would have gone through, the discounts on many branded prescriptions would have been passed on to the customers that drugmakers presently pay to insurers and middlemen.

But the setbacks in both the proposals has placed Republican’s Donald Trump at the vulnerable edge, widening the room for criticism on his promises to lower drug prices. On the good part, the cancellation of plans softened concerns of major disruption in the US pharmaceutical industry. The Dow-component UnitedHealth (NYSE:UNH) shares surged 5.53% to close at USD 261.16 on Thursday, steering the Dow rally to the record high levels.

Stocks on Wall Street were also lifted due to the statement of Federal Reserve Chair Jerome Powell, which signalled possible rate cuts in the coming months. At congressional testimony on Wednesday, Powell reaffirmed the rate cuts views advising that the central bank has room to soften monetary policy as the relationship between inflation and jobless rates have broken down.

The market started humming on the optimism around the rate cuts that could possibly offset the financial weakness stemming from a global slump in manufacturing and businesses linked to the uncertainty around the trade tensions. Dow’s rally came just a day later S&P 500 touched 3,000 mark for the first time.

Let’s lens over some top performers in the index that took Dow to record 27,000 from the time it first reached the mark of 26,000 in January 2018. Technology company Microsoft seized the first spot, contributing more than 50% to the gain of 1000 points in Dow since 2018, as per the market reports. Financial services company Visa and technology conglomerate Cisco has taken the 2nd and 3rd spot among the top three performers in Dow-component while other leaders included Walt Disney, Nike, Merck & Co., American Express and Procter & Gamble, among others.

Microsoft Corporation (NASDAQ:MSFT) shares surged 0.40% to close at USD 138.40 on Thursday. Visa Inc (NYSE:V) stock edged up 0.80% and Cisco Systems, Inc. (NASDAQ:CSCO) up by 0.30% to close at USD 180.74 and USD 57.30, respectively.

European market back in the green after stumbling on IMF report

In the recently released Annual Report, International Monetary Fund (IMF) stated that the European economy’s exposure to rising risk calls for more stimulus. The Fund stated that the risk in the euro zone is stemming from the uncertainty hovering around Brexit, the escalating trade tensions between China and the United States, and the debt-ridden economy of Italy.

IMF said that the European Central Bank's plans to keep monetary policy accommodative were “vital” as the currency bloc faces “a prolonged period of anaemic growth and inflation”.

The Fund also asserted that Central Bank may have only limited room to cut interest rates; however, it considered substantial stimulus in the face of credit easing measures such as new cheaper liquidity facilities for banks.

The news parked the European market in the red zone with FTSE 100, DAX, FCHI down 0.3 per cent each.

IMF reports also talked about slow-moving growth, predicting 19-nation GDP to grow by 1.3% in 2019 compared to the growth of 1.9% in 2018. However, the Fund also made an estimation to see a rebound in 2020 with an expectation of 1.6% growth in GDP.

The report also said that the euro remained slightly undervalued despite showing strength last year. It, therefore, urged Germany and other countries with a trade surplus to invest more to support the rebalancing of the exchange rate.

International Monetary Fund report also touched upon the urgent requirement for centralised supervision, given the multiple money laundering breaches at EU banks.

In Friday mid-day trade session, European market can be seen back in bull-run. FTSE 100, an index of top 100 companies listed on London Stock Exchange with respect to market-cap, has moved up 0.24% to 7,525.49 points as at 12 July 2019 (12:13 PM GMT; 9:13 PM AEST).

Market lift in European Stocks was driven by the positive results of China exports. An official report released that China’s exports fell 1.3% in June, well below the market expectation of 2%, as per the media report.

The market speculation was led by the ferocious trade conflicts between China and the United States, where both the nations have slashed multi-billion-dollar worth tariffs on each other’s imports. Much talked about Sino-US trade war is currently being discussed on the sidelines of Silicon Valley tech players’ plan to withdraw a significant part of their production from China that poses a major threat to China’s economy.

DAX Performance Index edged up 0.055% to stand at 12,338.01 as at 12 July 2019 (12:57 PM GMT; 9:13 PM AEST), while CAC 40 is up 0.54% to 5,582.09.

Also Read: How does Global Financial Shocks affect the Australian economy

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