Positive Tax Reform News Drives Up Demand for Risky Assets

Economic data and political news helped drive up demand for risky assets on Thursday. After spending most of the week on the defensive, investors aggressively bought beaten up assets such as the U.S Dollar and U.S. stocks.

U.S. Economic Reports

Weekly Unemployment Claims unexpectedly rose last week in part as a backlog of applications from Puerto Rico continued to be processed. According to the Labor Department, initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 249,000 for the week-ended November 11. Economists polled by Reuters had forecast claims falling to 235,000 in the latest week.

The claims report also showed the number of people still receiving benefits after an initial week of aid dropped 44,000 to 1.86 million in the week-ended November 4, the lowest level since December 1973.

U.S. import prices rose less than expected in October as an increase in the cost of imported petroleum and capital goods was offset by a decline in food prices.

According to the Labor Department, import prices gained 0.2 percent last month after an upwardly revised 0.8 percent jump in September, Economists polled by Reuters had forecast import prices increasing 0.4 percent in October after a previously reported 0.7 percent gain in September.

The Fed said industrial production accelerated 0.9 percent last month with output at factories surging 1.3 percent. The Capacity Utilization Rate came in at 77.0%, beating the 76.3% estimate. The Philadelphia Fed showed its index of factory activity in the mid-Atlantic region fell to a reading of 22.7 this month from 27.9 in October, manufacturers reported robust demand for their products, rising backlog and declining inventories.

Fed Speakers

Global central bankers should take this moment of “relative economic calm” to rethink their approach to monetary policy, San Francisco Fed President John Williams said Thursday, warning that to fight the next recession, as with the last, they would need to do more than just cut interest rates.

Dallas Federal Reserve Bank President Robert Kaplan on Thursday repeated that he is “very open-minded and actively thinking about” a possible interest-rate hike at the U.S. central bank’s next policy meeting.

U.S. Tax Reform

The U.S. House of Representatives approved a broad package of tax cuts affecting businesses, individuals and families on Thursday, moving Republicans and President Trump an important step closer to the biggest tax code overhaul in a generation.

Gold

Gold futures traded in tight, two-sided range on Thursday after the U.S. House of Representatives passed its version of sweeping tax cuts and rising expectations of an interest rate hike by the U.S. Federal Reserve in December.

Traders said that gold continues to be pulled in both directions due to pressure from the prospect of a rise in U.S. interest rates and support from uncertainty about U.S. fiscal policy.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished lower on Thursday as expectations that OPEC would extend production cuts were offset by the impact of rising U.S. crude production and inventories.

Oil prices have been under pressure since November 8 when they were trading at a 2-year high. Sellers began to take control after signs that U.S. supply is rising fast and could potentially undermine OPEC’s efforts to tighten the market.