Investing.com - Here are the top five things you need to know in financial markets on Wednesday, January 3:
1. Eyes on Fed minutes, ISM manufacturing
The Federal Reserve will release minutes of its December policy meeting on Wednesday at 2:00PM ET (19:00GMT).
The U.S. central bank hiked interest rates for a third time in 2017 at the conclusion of its two-day policy meeting on December 14, in what was a widely anticipated decision and indicated that it would stay on a similar path next year.
The central bank also said it expected inflation to remain below its target for another year, tempering expectations for an accelerated pace of rate hikes in 2018.
Investors will also keep an eye out for the December manufacturing purchasing managers’ index (PMI) from the Institute of Supply Management (ISM) at 10:00AM ET (15:00GMT).
2. Dollar breaks 5-day losing streak in modest recovery
While waiting for the aforementioned data, the dollar underwent a modest recovery against major Forex rivals on Wednesday, breaking a five-day losing streak.
The greenback started off 2018 in the doldrums, after registering its largest annual drop, nearly 10%, in 14 years.
The U.S. dollar weakened in 2017 as the global economy gained momentum fueling expectations for tighter monetary policy in other countries, which would lessen the divergence between the Federal Reserve and other central banks.
Some analysts signaled the possibility that the Fed may surprise markets in 2018 if the recently passed tax overhaul manages to boost the American economy and fuel inflation, forcing a faster-than-expected pace of tightening.
At 6:09AM ET (11:09GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, gained 0.21% at 91.75.
3. Global stocks mark new record highs
Global stocks began to get back to business as usual at the start of 2018, with most major bourses, with the exception of Japan, back in full-swing and hitting fresh record highs.
U.S. futures pointed to a continuation of the rally on Wednesday after Wall Street closed at record highs a day earlier. While waiting for Wednesday’s economic data, particularly ahead of the monthly employment report out on Friday, the blue-chip Dow futures rose 53 points, or 0.21% by 6:10AM ET (11:10GMT) Wednesday, S&P 500 futures advanced 6 points, or 0.21%, while the Nasdaq 100 futures gained 15 points, or 0.23%.
Elsewhere, European shares were mostly higher on Wednesday as traders watched for indications of the impact from new financial market rules. The benchmark Euro Stoxx 50 gained 29%, while Germany’s DAX traded up 0.45% by 6:12AM ET (11:12GMT). London’s FTSE lagged behind European rivals, inching up 0.05%.
Earlier, Asian shares ended Wednesday near record highs as bullish sentiment supported buying. The Tokyo Stock Exchange was closed for a holiday.
4. Oil holds near multi-year highs ahead of inventory data
Oil prices continued to march higher on Wednesday as market participants eyed developments in Iran. The country was staging pro-government rallies on the back of six days of protests, although Iranian oil production seemed so far to be unaffected.
U.S. crude oil futures rose 0.27% to $60.53at 6:12AM ET (11:12GMT), while Brent oil advanced 0.23% to $66.72.
The gains came ahead of weekly U.S. inventory data, delayed by one day more than normal due to Monday’s New Year’s holiday.
The American Petroleum Institute will release its weekly stockpile data after the market close on Wednesday while the official U.S. government data will be released on Thursday amid expectations for a draw of 5.3 million barrels.
5. MiFID II financial market rules take effect
Traders were keeping watch over Europe’s revision to financial market rules -Markets in Financial Instruments Directive, known as MiFID II- which launched on Wednesday.
Among the wide scope of new regulations, MiFID II alters how investment research is paid for, how trades are documented and executed, and how brokers share information, find the best prices and pay one another.
The journey on the revision began back in 2008 as policymakers identified weak areas in the aftermath of the financial crisis.
Perhaps the most relevant of the new regulations for the financial sector is that investment banks will now be required to charge separately for research and brokerage services with an aim to avoid conflicts of interest.
Also in MiFID II’s sights, the regulation intends to increase the transparency of so-called “dark pools”, private markets that allow investors to buy and sell large blocks of shares without revealing beforehand the size of the orders or the price they paid