Daily market overview from IFC Markets

[IFCM]

Markets decline as oil plunge continues

Markets continued retreating on Tuesday as oil prices slumped. The sell-off of US stocks continued for the second consecutive day. The S&P 500 benchmark index fell for the fifth session in a row, with only two sectors – utilities and telecoms, remaining in the green. Reports released on Tuesday indicated orders for goods produced in US factories fell 0.7% in November, and companies in services sector grew at a slower rate in December. Intercontinental Exchange Inc.’s US Dollar Index, which measures the currency’s performance against the basket of six major currencies, rose 0.3 percent to 91.741 after climbing to 91.818, the highest level since December 2005. Today at 14:15 CET December Non-Farm Employment Change by ADP will be released in US. The tentative outlook is positive for US dollar as the economy is expected to add 227,000 jobs in December, more than the 207,000 jobs gained in the previous month. At 20:00 CET Federal Open Market Committee December Meeting Minutes will be published. After the December FOMC meeting the Fed modified its statement about keeping interest rates low for “considerable time” saying instead it will be patient about future interest rate hikes but plans to raise interest rates in 2015. The Fed stance was interpreted as more hawkish as Chairwoman Janet Yellen sounded optimistic about US economy and unconcerned about the impact of falling oil prices. The details of the meeting minutes may reveal whether bullish or dovish considerations prevailed in the internal debate, which may accordingly boost or weaken the bullish dollar sentiment.

European stocks fell on Tuesday for third consecutive day in a row. Markit reported on Tuesday euro-zone activity in the manufacturing and services sectors rose marginally in December with the PMI growing to 51.4 against 51.1 in November. Euro fell for a fourth day. Today at 11:00 CET euro-zone December Consumer Price Index will be released. The inflation in November reached 0.3%, much lower than the ECB inflation target of just below 2% over the medium term. With falling oil prices the disinflationary pressures have increased, and a further decrease in CPI is expected in December. In case the CPI comes out negative indicating an annual decline in prices, it will be a critical factor that may provide the justification for the start of a large-scale sovereign-bond purchases for coming ECB meeting on January 22, thus contributing to further euro weakening.

Nikkei fell 3% on Tuesday posting its biggest one-day loss in nearly 10 months. As investors sought safe havens after stocks slumped around the world this year the yen advanced against the dollar. Japanese stocks and East Asian markets are trading mostly higher today, and the yen fell versus all 16 major currencies as Asian stocks snapped a two-day rout, decreasing the demand for safer assets.

Oil continued falling on the backdrop of a global supply glut, rising US dollar and increased uncertainty over euro-zone economy prospects. WTI traded near $48 a barrel. There are no indications the global demand will increase significantly in the first half of 2015, which means bearish factors will determine the market dynamics in the near term.

Gold fell for the first time in four days before the Federal Reserve releases minutes for its December meeting that may give clues to the timing of higher interest rates, curbing demand for the metal.

 

[IFCM]

Markets advance as oil rebounds

Markets rebounded and oil rose on Wednesday. US stocks recorded solid gains, with the S&P 500 index snapping a five-day losing streak and recording its first gain in 2015. Investor optimism was boosted as oil markets stabilized and better than anticipated employment data were released by ADP. The dollar continued to advance against major currencies with ICE US Dollar Index rising 0.61% to a level slightly below a nine-year high reached earlier in the session. The investor reaction to the minutes of the December meeting of the Federal Reserve was neutral as minutes indicated that low inflation would not prevent the central bank from raising rates, but the central bank was in no hurry to start raising interest rates, not until at least April. Today at 14:30 CET the labor market data will be released in US. The number of Initial Claims is expected to fall to 290,000 this week compared to 298,000 increase last week. The fall in initial claims should contribute to further strengthening of US dollar. At 21:00 CET the November Consumer Credit number will be released, the tentative outlook is positive for the dollar.

European stocks recorded their first gain of 2015 as investors bet on further stimulus measures from the European Central Bank after consumer price data with first deflationary reading on annual basis since October 2009 were released. Euro fell for a fifth day, trading at nine-year lows against the dollar on the prospect of further monetary stimulus. Today the euro-zone Retail Sales number for November will be reported at 11:00 CET after the German Factory Orders for the same month is released at 08:00 CET. Both indicators are expected to come out below the previous month readings, and lower actual numbers may negatively affect the single European currency.

Japanese stocks are rising today as rising US and European markets and a rebound in oil prices eased investor concerns. The Nikkei added 0.01 percent on Wednesday, just managing to snap a four-day losing streak. The yen also weakened against the dollar trading above 119.00 level, compared to 118.71 Tuesday. The divergent central bank policies of Bank of Japan and the Federal Reserve with the BOJ implementing accomodative policies while the Federal Reserve moves toward raising interest rates constitute the main source of the yen weakness. Yen weakness will continue if no major policy reversals take place.

US crude oil rose Wednesday, snapping a four-session losing streak after a dip below $47 a barrel earlier in the day as a weekly US inventories report showed a surprise drop in crude supplies. WTI for February delivery rose 1.5% to settle at $48.65 a barrel on the New York Mercantile Exchange. There are no signs that the current bearish trend will reverse in short term as analysts from Bank of America Merrill Lynch estimate that Non-OPEC and OPEC producers don’t plan curbing output and it will take time for the global demand to increase with lower prices.

Natural gas for February also retreated - 2.3% to $2.8710 per million British thermal units, the lowest settlement since September 2012. Today at 16:30 CET the EIA Natural Gas Storage Change for the week ended January 2 will be published, with an expected decline of 116 billion cubic feet. A bigger than expected actual number may result in increase in gas prices.

 

[IFCM]

European markets rise on US futures lead

World markets were traded lower on Friday. Average Hourly Earnings in December, released in the United States, indicated unexpected decrease and affected investor’s sentiment. Non-Farm Employment Change outperformed the outlook, Unemployment Rate dropped to the lowest level over 6.5 years (5.6%). In general, 2.95 million new jobs were created in the US in 2014, the highest level since 1999. However, stocks were traded lower along with the US dollar index. The stocks that posted the biggest losses were JPMorgan Chase (-1,7%) and Wells Fargo (-1,6%). Investors are concerned that next week these companies may publish weak Q4 earnings reports. The volume traded on US exchanges was 12% lower than the weekly average and amounted to 6.3 billion shares. We don’t expect any significant US statistics released today.

Today European indices are advancing on US stock futures lead. Crude oil prices hit new low. Investors deem that cheap hydrocarbons would accelerate the economies of western countries. Amid additional positive news from the EU we would like to note that pharmaceutical company Shire bought NPS Pharmaceuticals for $5.2 billion. This was the reason why other stocks in medical sector rose as well. Today macroeconomic reports in the EU are not expected.

Japanese markets are closed due to the Bank holiday, Coming-of-Age Day. Note that tomorrow morning a few economic indicators will be released in Japan. They have little chances to affect markets. Trade Balance in December will be published in China: it may have a strong impact on commodity futures prices.

Crude oil prices have continued dipping as the investment bank Goldman Sachs cut its WTI price outlook from $70 to $41 a barrel in the first half of the year, and down to $47 for the entire 2015. According to Goldman Sachs, the average Brent crude oil price would be $50.4 a barrel this year. The bank expects that WTI-Brent spread could increase up to $5, from $1,5-2 .

Precious metals continued to go up. The weekly rise in gold prices was the largest since July. SPDR Gold Trust reserves upped 0.4%, to 707.8 tons. According to U.S. Commodity Futures Trading Commission (CFTC), gold net log positions rose 8.5% over the week and hit the five-month high.

Coffee prices have boosted amid information about drought forecasts in Brazil published by Somar Meteorologia and MDA Weather Services. So 40% of the crop is in jeopardy. The weekly increase in coffee prices was the highest over 11 months. According to CFTC, net long positions rose 6.6% over the week, the largest increase since October.

The majority of other commodities sagged on fallen oil prices. Oil makes up a significant part of their production.

Today at 17:00 CET USDA is expected to release the quarterly report revealing the data on global grain supply and demand, and the amount of grain inventories in the US. Moreover, winter wheat crop in the US will be assessed. The data may affect strongly the price. Most market participants expect wheat-cultivated areas would expand. Prices hit six-week lows on Friday. According to CFTC, wheat accounted for net short positions, meanwhile soybeans – net long positions.

 

[IFCM]

Markets mixed as oil plunge resumes

Markets were mixed on Monday as oil resumed its fall. US stocks fell for a second straight trading session as investor confidence was hit by further plunge in oil prices ahead of the start of the fourth-quarter earnings season. Investors’ earning expectations have become less positive as energy companies’ profits will be hit by falling oil prices. The ICE dollar index finished the day unchanged after falling on Friday as mixed US jobs report indicated hourly wages fell last month. Today at 16:00 CET the November Job Openings and Labor Turnover Summary (JOLTS) will be published in US. The US economy has been creating jobs at a healthy pace during the past year, and the last JOLTS report indicated increase in October job openings to 4.834 mln from previous month’s 4.685 mln level. A higher than expected increase in job openings will likely result in further strengthening the US dollar.

European stocks rose on Monday as investor confidence was boosted by reports the European Central Bank is considering various schemes for launching a quantitative-easing program. According to CNBC report, the ECB is considering a quantitative-easing program where the magnitude of a country’s sovereign debt the ECB would purchase would be determined by the level of paid-in capital contribution made by national central banks into the ECB. The euro slumped to a near nine-year low against the dollar. As ECB is moving towards implementing a monetary stimulus program to support sluggish economy and ward off deflation, the pressure on euro will remain. Goldman Sachs raised its forecast for the dollar to $1.14 per euro in three months from a previous prediction of $1.23. Today at 10:30 CET the December inflation data will be published in UK. The annual consumer price inflation has been below the 2% target for all previous months of 2014, with CPI inflation falling to 1% in November from 1.3% in the previous month. Further slowing of inflation is likely to negatively affect the British Pound as the central bank will most likely refrain from taking measures toward monetary tightening in 2015 while the inflation is falling further away from the 2% target rate.

The Nikkei is falling on the backdrop of falling US stock markets, sliding oil prices and rising yen. The yen rose for a third day against the dollar as the slide in oil prices spurred demand for haven assets. Falling oil prices contribute to narrowing Japan’s trade balance, providing further support for the yen.

Oil continued falling amid speculation that US crude stockpiles increased. As US production reached the highest level of 9.14 million barrels a day through December 12, the most in weekly EIA records that started in January 1983, the United Arab Emirates Energy Minister Suhail Al Mazrouei said yesterday UAE will continue plans to boost its production capacity to 3.5 million barrels a day in 2017 as it pumped 2.7 million a day last month with a current capacity of 3 million.

The soybeans futures tumbled as the US Department of Agriculture said inventories expanded in the US, the world’s biggest grower, and revised upwards the US production data to a record 3.969 billion bushels (108.01 million metric tons) from 3.958 billion in December.

Copper traded near the lowest since October 2009 after falling 1.2 percent yesterday on concern that output is outpacing demand.

 

[IFCM]

Markets mixed as oil slide continues

World markets were mixed on Tuesday as oil continued falling. US stock market started the trading session with a rally but the early gains were reversed by midday and the market ended the session slightly lower, recording triple-digit swings in the key benchmarks. Positive reports released on Tuesday indicating that the labor market is improving as November job openings rose to 4.97 million from October’s 4.83 million, and a measure of small-business confidence rose in December to the highest level in more than eight years didn’t boost investor optimism sufficiently to overcome concerns over global deflation as oil slide continues. Dollar continued strengthening as the ICE Dollar index, which measures the dollar’s strength against a basket of six major currencies, rose 0.35% to 92.2980. Today at 14:30 CET December Advance Retail Sales numbers will be published in US. Retail sales are expected to contract which may have a limited negative effect on US dollar, unless an actual reading indicates a surprise rise in retail sales which will contribute to the US dollar strength. At 16:00 CET the November Business Inventories number will be released. A lower than expected actual reading for inventories growth rate may have a positive effect on US dollar.

European stocks rose on Tuesday on reports the European Central Bank is considering a sovereign-debt buying program to stimulate the euro-zone economy and stave off deflation. Euro extended its losses against dollar and declined to nine-year low amid expectations the ECB will launch an extensive stimulus program at its meeting on January 22. Bank of England Governor Mark Carney said in an interview with BBC that the ECB and President Mario Draghi have made it “very clear” that investors can expect “considerable asset purchases” in the months to come. Another factor of pressure on euro is the political uncertainty surrounding the Greece elections.

The Nikkei closed down 0.6% on Tuesday on worries about global economic outlook and impact of falling oil prices. The yen rose for a fourth day against the dollar as falling equities and concern over global economic slowdown boosted haven asset demand. Japanese stocks are falling today. Tomorrow November Machine Orders and December Domestic Corporate Goods Price Index will be released in Japan. Core machinery orders are expected to rise, indicating capital spending is picking up, which may positively affect the yen.

Oil fell for a fourth day, extending losses from the lowest close in more than five and half years as Ali Al Yabhouni, the United Arab Emirates’ governor to the Organization of Petroleum Exporting Countries, said yesterday the market may recover only when demand improves later this year.

Gold fell yesterday, trading below 12 week-high on the backdrop of slowing global economy and the prospect for higher US borrowing costs. Industrial metals fell on concern that global demand will not be enough to eliminate a supply glut after the World Bank revised downward its forecast for global growth in 2015. The world economy will expand 3 percent in 2015, down from a projection of 3.4 percent in June, according to the World Bank’s report released yesterday. Copper tumbled the most in almost six years to below $5,400 a metric ton as the demand for the metal in China, the world’s biggest user, is forecast to slow this year while supply rises globally.

 

[IFCM]

Markets retreated while oil rebounded

US stock market ended the session lower for the fourth consecutive day as a weaker than expected December retail sales report released before the start of trading sparked investor concern over the pace of US economic growth. As retail sales slumped in December by the most in almost a year investors are worried that the slide in oil prices hasn’t resulted in a boost to consumer spending. The ICE US Dollar Index, a measure of the dollar’s strength against a trade-weighted basket of six major currencies, fell 0.22% to 92.1030. Today at 14:30 CET Initial Jobless Claims for the week ended January 10, Continuing Claims for the week ended January 3 and December Producer Price Index will be released in US. The unemployment claims are expected to fall, the tentative outlook is positive for US dollar and lower unemployment readings will likely contribute to dollar strengthening. At 16:00 CET the Philadelphia Fed Manufacturing Index for January will be released. The consensus expectation for the index is a decline to 19.1 from previous month’s 24.3 level, a lower than expected reading may negatively affect the US dollar.

European stocks fell Wednesday as investors weighed the World Bank’s forecast of slower global growth and lower than expected retail sales data from the US, the world’s largest economy. Euro recovered from session lows after data confirmed that factory output across the euro-zone rose for the third straight month in November. As the euro-zone economy struggles to stave off deflation, the pressure on euro remains strong with investors looking forward to the European Central Bank’s January 22 meeting when additional measures for expanding monetary stimulus program are expected to be announced. Today at 10:00CET the 2014 German GDP will be released, and at 11:00 CET November euro-zone Trade Balance will be published. The tentative outlook is positive for euro.

Nikkei is rising today after shedding more than 400 points in the previous two sessions. Yen advanced to its highest level in four weeks against dollar on disappointing retail sales in the US. The demand for safe haven asset may contribute to further yen strengthening if global equity markets continue to fall.

Oil rebounded yesterday from five and half year low as options expiration bolstered activity. The rebound is seen more technical as indicators signaled that oil was oversold. There are no signs global demand is picking to eliminate the supply glut. US crude production rose last week to highest level since 1983 even as prices slumped. Furthermore, Iraq plans to double exports to 300,000 barrels a day within weeks from its northern Kirkuk oil fields and continue boosting output further south.

Copper led a rebound in base metals after slumping to the lowest in more than five years as central bank data released in China indicated credit growth to 1.69 trillion yuan ($273 billion).

Natural gas rose for the third day in the biggest surge in 11 months as a blast of Arctic weather predicted to swoop into the US signaled increased demand after a mild December. Today at 16:30 CET the EIA Natural Gas Storage Change for the week ended January 9 will be published, with an expected decline of 131 billion cubic feet. A bigger than expected actual number may result in increase in gas prices.

 

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[IFCM]

Markets closed as US celebrate Martin Luther King Day

Friday was marked by growing quotes on international stock markets. The Michigan consumer sentiment index in January outstripped forecasts and suddenly reached 98.2 points, renewing its 11-year maximum. All the other American macro-economic data also appeared to be positive. The month to month inflation rate in December decreased by 0.4% (this has become the maximum decline since December 2008). CPI yoy in December slipped to the lowest level since October 2009 and made up 0.8%. This is far lower than the Federal Reserve System target level of 2%. The data strengthen the expectations of the refinancing rate to be increased this year. Please note that though industrial output in December was comparatively weak, they met the target. Despite the upturn on Friday, the Dow Jones, the S&P 500 and the Nasdaq indices fell by 1.3, 1.2 and 1.5 percent respectively, drawing the weekly balance. Earlier, investors responded negatively to the decrease in retail sales and, as fairly, to GDP forecasts. American stock markets turnover was 4% above the 5-day average and made up 7.7 billion shares. Today American exchange markets are closed due to the American public holiday, Martin Luther King Day.

Today European stock indices continue to grow at the prospect of 500-550 billion euro emission which is likely to be announced on Thursday at a regular session of the European Central Bank. As exchange markets are closed and Thursday is still far ahead, the European Union observes a rather weak share price growth. Significant macroeconomic data are not expected to be published today. On Friday euro hit a new 11-year low as a result of the National Bank of Switzerland decision we had written about in our previous overview. Today the European currency is slightly moving up. We believe that until the next ECB meeting takes place, euro is likely to be traded sideways.

Nikkei has risen this morning together with other world stock indices. It was partly encouraged by the growth of the Japanese consumer confidence marker in December, which slightly outstripped forecasts. JPY/USD slipped in expectation of the Bank of Japan meeting (which is to take place January, 20-21). Investors anticipate the positive forecast of the core inflation rate for the current year, which is likely to decline from 1.7% predicted in October to 1.5%. Herewith, on Wednesday morning the Bank of Japan holds the final press conference and may declare the augmentation of emission and the raised GDP forecast. Analysts do not expect any particular macroeconomic data concerning Japan to be announced tomorrow.

Chinese officials will publish a report on GDP for the fourth quarter along with industrial production and retail sales data in December. In our estimation, forecasts are negative. There is a risk that the GDP growth will not meet the Chinese government’s expectations or even reaches its 24-year low. In this case, commodity futures prices may drop.

As we assumed in our previous overviews, oil and gold prices continued to grow. According to Baker Hughes, the oilfield services company, the number of US-based oil wells reduced by 55. This reduction is the second biggest within 24 years and has already been the sixth one in a row. We recall that the week earlier this number of oil wells decreased by 61. At the moment, there are 1366 operating oil wells, their quantity has been at its minimum since October 2013. We suppose that the rundown in drilling is absolutely logical. When oil price had fell by almost 60% within 6 months, the majority of oil fields became unprofitable. The dwindling number of wellsites may result in oil output declining and the price increasing. According to the U.S. Commodity Futures Trading Commission, the number of net long positions for WTI crude oil rose by 12% last week.

Gold hit its 4-month high at the prospect of the expected euro printing. The SPDR Gold Trust weekly reserves gained 1.9% and made up 730.9 tons. This has been the max growth since May 2010.

 

[IFCM]

Markets advance in anticipation of the ECB meeting

US stock markets were closed on Monday for the Martin Luther King Jr. holiday. When trading resumes today investor attention will likely be focused on earnings reports of big corporations like Morgan Stanley, Johnson & Johnson, IBM and Netflix. Today at 16:00 CET the January Housing Market Index by National Association of House Builders will be released in US. The Home Builders confidence index, which is seen as a proxy on housing construction, has been above 50 for 6 straight months and is expected to rise to 58 from 57 in December. The tentative outlook is positive for US dollar.

European stocks rose on Monday on expectations the European Central Bank will announce broad measures for expanding the monetary stimulus program at its meeting on Thursday. The Stoxx Europe 600 posted its highest close in seven years. Investor sentiment was boosted after French President François Hollande said policy makers at the ECB meeting on Thursday “will take the decision to buy sovereign debt, which will provide significant liquidity to the European economy and create a movement that is favorable to growth.” In a note released on Monday Societe Generale projected the quantitative easing package will eventually include 400 billion euros ($465 billion) of private assets, and €500 billion to €600 billion of sovereign bonds. Market participants on the other hand are concerned the additional stimulus measures announced by the ECB at its policy meeting will fall short of analyst forecasts as the euro advanced against the dollar. The euro will likely trade sideways till the ECB meeting clarifies further policy actions by the regulator. Today at 08:00 CET the German and Euro-zone Zew Economic Sentiment Index for January will be published. The indicators are expected to grow and the tentative outlook is positive for euro.

Nikkei is rising today after better than expected growth data were released in China and investors weighed the prospect of further monetary easing measures by the ECB. China’s GDP rose 7.4 percent in 2014 from a year earlier, and the industrial production last month grew 7.9 percent from a year earlier, compared with a 7.4 percent forecast. The yen declined for a third day versus the dollar as better than expected growth data from China reduced the demand for haven assets. Tomorrow morning at 01:00 CET Bank of Japan Monetary Policy Statement is expected.

Oil fell on Monday as J.P. Morgan cut its 2015 average Brent crude price forecast to $49 a barrel from $82, saying in a note oil could trough in March at an average of $38 a barrel followed by a U-shaped recovery, rising to $90 a barrel in 2019. There are no signs the global demand will rise in the near term to clear the supply glut on the backdrop of the global economy slowdown. The International Monetary Fund cut its 2015 global growth forecast to 3.5 percent from an earlier estimate of 3.8 percent and revised downward its China outlook to 6.8 percent from 7.1 percent.

Gold prices are rising today after slipping on Monday. Weak equity markets and the prospect of further stimulus measures from ECB contribute to sustained safe haven demand for gold. Copper is rising today after better-than-expected growth data in China, the world’s largest consumer.

 

[IFCM]

Investors cautiously optimistic ahead of ECB meeting

US stocks recorded marginal gains on Tuesday after pairing big early losses as investors appeared uncertain about the prospects of the monetary stimulus program in Europe. The European Central Bank is expected to announce further measures of monetary expansion to support the euro-zone economy, but investors are concerned that the scope of the measures will not be sufficient to combat deflationary pressures. The dollar strengthened after the International Monetary Fund raised its US growth forecast to 3.6 percent expansion in 2015, from 3.1 percent. Today at 13:00 CET the Mortgage Applications for the week ended January 16 by Mortgage Bank Association will be released in US. And at 14:30 CET the December Building Permits and Housing Starts will be published, the tentative outlook is positive for US dollar as both indicators are expected to grow.

The European stocks advanced, hitting multi-year highs on expectations the ECB will launch a new phase of monetary stimulus program. Market participants expect the ECB will announce a program of around €500 billion to €750 billion of sovereign bond purchases to revive slowing Eurozone economy. The euro traded near an 11-year low reached last week on anticipation of the launch of the ECB government bond purchases program. Today at 10:30 CET the November Average Weekly Earnings Index, Unemployment Rate and Employment Change will be published in UK. With the average weekly earnings expected to rise and unemployment rate forecast to fall, the tentative outlook is positive for British Pound. The Bank of England minutes are also expected to be released at the same time. As disinflationary pressures have become apparent with data showing falling CPI levels, the minutes may reveal a change in the vote split of the Monetary Policy Committee, where the votes in favor and against a rate hike were split two to seven. If the split disappears reflecting increased dovish stance in favor of waiting longer for an interest hike, this may negatively impact the Pound.

Japan’s Nikkei surged on Tuesday as investor sentiment was buoyed by China's better-than-expected growth data and expectations of ECB monetary stimulus plan. The yen gained against the dollar, snapping a three-day drop, after Bank of Japan decided not to expand further its monetary stimulus program and keep the pace of monetary base expansion at 80 trillion yen ($679 billion). Instead, it extended for a year two loan schemes aimed at encouraging banks to lend more, expanding one of them by 3 trillion yen. The Nikkei is falling today as investors are taking profits.

Oil prices fell as the IMF cut its global growth outlook and Iraq’s Oil Minister said Iraqi crude production surged to a record 4 million barrels a day and plans are to boost exports further. On the backdrop of falling oil prices, oil companies are reviewing their capital expenditure and shale oil exploration plans. US drillers cut the number of oil rigs in service by 209 since December 5, the steepest six-week decline since Baker Hughes Inc began tracking the data in July 1987. Analysts estimate lower prices will slow the US shale oil output growth in the second half of this year.

Gold futures prices rose above $1,300 for the first time since August on investor concerns over worsened global growth outlook after IMF made steepest cuts in global growth forecasts.

 

[IFCM]

Markets discount Greek election results

World stock markets were mixed on Monday. US stocks recorded small gains after choppy trading session. The investor optimism was underpinned by the launch of the sovereign bond-buying program last week by the European Central Bank. The main indexes closed with marginal gains after swinging between small gains and losses. The ICE dollar index remained unchanged at 94.7720. The investors discounted the Greek election results clearly considering them no threat to stability of financial markets. Investor attention will be focused on earnings reports this week and the policy-setting Federal Open Market Committee two-day meeting starting today. The Fed is expected to leave interest rates unchanged. Today Apple and Yahoo will report their earnings and a number of indicators including the Durable Goods Orders, Case-Shiller 20 City Home Price Index and, Markit’s Composite and Service PMIs and New Home Sales will be published in US. At 14:30 CET December Durable Goods Orders will be released. The tentative outlook is positive for US dollar. At 15:45 CET Markit’s PMI January preliminary data will be released, and 16:00 CET December New Home Sales and January Conference Board’s Consumer Confidence index will be published in US, the tentative outlook is positive as indicators are expected to rise.

European stocks closed higher with Stoxx Europe 600 gaining 0.6%, recording its eighth straight win. On Monday anti-austerity Syriza party formed a coalition with the anti-bailout Independent Greeks party. The euro remained higher against most of 16 major currencies. Investors consider the possibility of Greek exit from euro-zone unlikely, as euro-zone finance ministers signaled their willingness to do a deal with Tsipras with possible debt-maturity extension but no debt writedown. Today at 10:30 CET fourth quarter yoy GDP preliminary data will be released in UK, the tentative outlook is positive for the Pound with a forecast of 2.8% growth rate against 2.6% previous quarter.

Nikkei fell 0.3% on Monday, and is rising today as investors expect the earnings reports from Japanese exporters will reflect the gains from a weaker yen. Economy minister Akira Amari said today that the central bank was not constrained by a loose schedule of about two years for achieving its inflation goal with falling energy prices likely delaying efforts to reach its target. The comment indicates that the Bank of Japan is not considering extra monetary stimulus measures, providing some extra support to yen.

Oil fell on Monday as concerns over Greek election possible fall-out for euro-zone economy added to worries about slowing global economy. Earlier Monday, the Organization of the Petroleum Exporting Countries’ Secretary-General Abdalla el-Badri said oil at $200 a barrel would be possible if producers don’t invest in new supply. He indicated $45 - $55 as likely the bottom, with a rebound likely “very soon”, according to Reuters. Experts expect the oversupply to persist at least through the first half of 2015. In its January outlook the US Energy Information Administration forecast Brent crude to average $58 a barrel this year and $75 a barrel in 2016.

Gold fell for a third day to the lowest in a week before Federal Reserve policy meeting and as European finance ministers agreed to work with the new Greek Prime Minister to restructure the Greek debt repayment schedule to keep the country in the euro-zone.

 

[IFCM]

US Q4 GDP worse-than-expected

Global stocks dipped on Friday. The USA Q4 GDP deepened worse-than-expected 2.6% after 5% rise in Q3. The year 2014 marked a 2.4% surge in economy, which is 2.2% higher than in 2013. Most investment banks consider the US Q1 GDP to ramp up by 2.5% this year. This week Dow and S&P 500 lost 2.8%, Nasdaq was down by 2.6%. As of January, Dow, S&P 500 and Nasdaq declined by 3.6%, 3.1% and 2.1% respectively. American stocks turnover on Friday was 22% over its 5-day average and made up 8.5 billion shares.

Significantly, the USA dollar index was weakly affected by macro-economic statistics. In January it recorded 7 straight months of expansion which has been the longest constant surge period since 1971. Our analysts believe it to be driven up by negative data from Greece that weakened the euro. Again, a rather moderate GDP advance was countervailed by other positive indicators. Q4 consumer spending added 4.3% (the best result since Q1, 2006). Michigan’s Consumer Confidence index has risen to its strongest since January 2004. We suppose that it was encouraged by cheap fuel, which has plunged by 43% since July 2014. Amid stable low inflation the Fed rate hike is more likely to happen. Today at 13:30 CET the US Personal Spending and Personal Income for December will be issued: indicators may be negative. At 14:45 CET the Manufacturing PMI index by Markit will be released, followed by the ISM Manufacturing PMI for January and Construction Spending for December, which are to be announced at 15:00 CET. The tentative outlook is neutral.

This morning European stocks have surged together with the US futures. New Greek authorities stated that harming banks or replacing bank managers with party officials is not among their plans. The announcement gave a 5.7% rise to the ATG stock index, which boosted other indicators. Several European and other countries’ Manufacturing PMI have been published this morning. They appeared to be neutral; no important economic statistics is expected today in Europe.

Nikkei slipped today amid Seiko Epson and Konica Minolta low earnings. These companies’ shares dropped 10.1% and 9.4%, respectively. The strengthening yen and Chinese negative statistics added additional pressure on stocks. Market participants expect little important data on Japan this week.

The Chinese Manufacturing PMI suddenly plunged below 50 points, for the first time over 2.5 years, and equaled to 49.8. That had a negative effect on quotes of several commodity futures.

Global oil prices rose due to the strike of American oil workers (the largest one since 1980). There are 3.8 thousand participants, working at 9 refineries that account for 10% of petroleum production in the US. The price was also affected by Baker Hughes announcement of 94 oil wells closed last week. This is the biggest figure since 1987 and the reduction continues for 8 straight weeks. There are 1223 operating oil pumps left: the 2014 high of 1609 oil pumps was reduced by 1/4, reaching the minimum since 2012.

Grain futures continue to retreat on the back of good weather forecasts. We suppose that they are also negatively affected by cheap oil, which is a part of prime cost for grain production. Low oil prices also slashed the demand for biofuel. Investors consider farmers to opt for grain instead of planting biofuel crops. Currency factor in crop-producing countries should be mentioned as well. The Brazilian real, the Russian ruble and the Canadian dollar sagged against the US dollar.

 

[IFCM]

Markets advance as oil rebounds

S markets recorded solid gains on Monday after a choppy trading session as investor sentiment improved with rebounding oil prices. Energy sector shares led the gains. Markets discounted disappointing economic news. The ISM report showed that manufacturing activity slowed in US, the manufacturing index fell to 53.5% in January from 55.1% in December, marking the worst performance in a year. At the same time, consumer spending didn’t increase with the falling oil price as it was widely expected - it fell 0.3% in December while personal income rose 0.3%. The Federal Reserve’s preferred inflation measure, the price index for personal consumption expenditures, fell 0.2% from November. The commerce Department report showed construction spending rose 0.4% in December, less than expected. The latest batch of economic data indicate that the US economic growth is slowing down. US dollar weakened against commodity currencies as oil rose. Today at 16:00 CET December Factory Orders will be released in US. The outlook is negative with the factory orders expected to decrease further after falling for four consecutive months.

European stocks edged higher on Monday. The gains were led by energy issues. The Markit PMI manufacturing report indicated the euro-zone manufacturing sector avoided contraction in January with activity expanding at a marginally higher pace compared with the previous month. After much investor anxiety about the negative impact of newly elected Greek government’s calls for Greek debt write-off on eruro-zone economy, Greek Finance Minister Yanis Varoufakis on Monday unveiled proposals to swap Greek debt for new bonds linked to economic growth. The proposal essentially is aimed at restructuring Greece’s 315 billion euros in foreign debt to ease the burden of repayment. Euro traded higher against dollar on Monday after the Greek Prime Minister Alexis Tsipras reassured the public that Greece would not leave the euro-zone. Today at 10:30 CET January Markit’s Construction PMI will be released in UK. The tentative outlook is positive with the construction sector expected to expand compared to the previous month. At 11:00 CET December Producer Price Index for Euro-zone will be published by Eurostat, the tentative outlook is negative with producer prices expected to fall for third consecutive month.

Nikkei is falling today after reports on US economic performance fell short of investors’ expectations. The airline companies and rubber product makers, which benefited from declining oil prices, continued to drop after oil prices rose strongly again on Monday. Yen traded lower against the dollar on Monday, pairing the gains following the report over the weekend, which showed China’s manufacturing activity contracted.

The Reserve Bank of Australia cut its cash rate today to 2.25% from 2.5% in a surprise move to keep a downward pressure on its currency. As a result, Australian dollar slumped against US Dollar and Japanese yen.

Oil continued to rise on Monday after recording an 8% gain on Friday, prompted by reports of another sharp decline in the number of drilling rigs in operation in US.

Gold futures were flat on Monday after the precious metal recorded its biggest monthly gain in three years last week. Gold rose more than 8% in January with increased demand for the safe haven asset as investors weighed the outlook for global equity markets on the backdrop of increased uncertainty and signs of slowing global growth.

 

[IFCM]

Rising oil boosts investors' optimism

US markets surged on Tuesday as rising oil prices lifted energy shares. Energy issues gained 2.8%, marking fourth-straight advance. Investors' optimism was boosted also by developments in Greece’s debt negotiations and automaker’s reports of increases in January car sales. Markets discounted the negative economic news indicating the factory orders fell in December 3.4%, more than the 2.5% decline forecast. The ICE dollar index, a measure of the US currency unit against a basket of six major currencies, fell 0.9% with easing of worries about Greece’s debt. Today at 14:15 CET January Employment Change will be released in US by ADP Inc. The tentative outlook is neutral as private employment is expected to grow by 225000 after rising by 241000 in December. At 15:45 CET the Markit PMI Services final index will be released, with a forecast of a marginal upward revision to 54.1 from the preliminary reading of 54.0. And at 16:00 CET ISM Non-Manufacturing PMI for January will be released. The tentative outlook is neutral for the dollar.

European stocks closed near seven year high after the Greek government proposal indicated it backed down from earlier calls to write-down Greece’s bail-out debt. Greek government proposed to swap bail-out debt for growth-linked bonds instead, aimed at shifting the burden of repaying the debt further into the future by replacing some of the current debt with growth-linked bonds and perpetual bonds. Euro traded higher on signs that the negotiations will soon end in a mutually acceptable compromise. Today from 9:45 to 10:00 CET final January Services and Composite PMIs for euro-zone countries including Germany, France, Italy and Spain and Euro-zone itself will be released by Markit. The tentative outlook is positive with the euro-zone services sector forecast to expand over the previous month. At 10:30 CET January Services and Composite PMI will be published in UK. The tentative outlook is positive. And at 11:00 CET euro-zone Retail Sales for December will be released by Eurostat. The tentative outlook is positive.

Nikkei is rising today extending its recovery from Tuesday's one week low. Financial shares are leading the gains as banks outperformed on strong earnings from Mitsubishi UFJ Financial Group. Yen traded lower against dollar staying in the familiar range of ¥117- ¥119.

Oil surged on Tuesday on speculation that a sharp decline in US drilling activity will result in supply declines. BP Plc announced it may spend less than previously planned after prices slumped more than 50 percent since June. While oil companies are adjusting their capital expenditure plans in the face of falling oil prices, market observers note that it will take time to balance the projected global surplus of roughly 1.5 million barrels a day. Currently global inventories are building as more unused oil goes into storage in many countries. Today at 16:30 CET Crude Oil Inventories change for the week ended January 30 will be released by the US Energy Information Administration. A report from the industry group American Petroleum Institute yesterday showed US crude stocks rose more than 6 million barrels last week.

Gold slipped on Tuesday as safe-haven appeal faded with Greece taking a much more accommodating stance on its standoff with the European Union on repayment of debt

Commodities rose as surging oil prices boosted investors' optimism. Sugar led increases in agricultural commodities, with New York futures gaining as much as 3.7 percent.

 

[IFCM]

Markets mixed as oil plunge resumes

US stocks pulled back on Wednesday on the backdrop of resumed slide in oil prices and news that European Central Bank will no longer accept Greek bonds as collateral. Energy, utilities and health-care stocks led the losses, with six of 10 main sectors ending the session with losses. The US economy added 213 thousand jobs in January in private sector. Though the increase was less than expected the report highlights the relative strength of the labor market which keeps adding jobs even as slumping energy prices hurt industries exposed to oil. The Institute for Supply Management’s non-manufacturing index advanced to 56.7 from a six-month low of 56.5 in December, indicating that services sector kept expanding at a slightly higher pace. The dollar strengthened with the dollar index pairing losses from the previous day. Today at 14:30 CET December Balance of Trade, Initial Jobless Claims for the week ended January 31 and Continuing Claims for the week ended January 24 will be published in US. The trade gap is forecast to decrease to -38.0B from -39.0B in previous month. The tentative outlook is moderately positive for the dollar with jobless claims expected to increase to 290000 from 265000 in the previous week, staying below the four-week average of 298500.

European stocks ended Wednesday’s choppy session mostly higher. The Stoxx Europe 600 index rose 0.5%, extending gains into a third straight day. Euro tumbled after the ECB revoked a waiver that had allowed Greek banks to use the country’s junk-rated sovereign debt as collateral for cheap loans. The decision by the ECB to reimpose minimum credit rating requirements for Greek bonds effectively shifts the burden on to the Greek central bank to finance its banks and came after the meeting of Greece’s Finance Minister Yanis Varoufakis with the ECB President Mario Draghi. Greece has also started negotiations with the International Monetary Fund on the debt-swap deal to exchange existing government debt with bonds linked to future growth. Data released on Wednesday indicated that euro-zone economy expanded more rapidly in January than previously estimated, with the retail sales rising for a third straight month in December and at the fastest pace in almost eight years. Today at 11:00 CET Retail PMIs for Euro-zone, Germany, France and Italy will be released by Markit and at 13:00 CET the Bank of England Interest Rate Decision will be announced. No change in policy is expected.

Nikkei is falling today as investors decided to take profits following earnings announcements while investor confidence was undermined by news of the ECB hardline stance on Greek debt and the resumed fall in oil prices. The yen rose against the dollar.

China’s central bank cut the required reserve requirement by half a percentage point to stimulate lending and the broader economic growth.

Oil plunged on Wednesday after advancing for four consecutive sessions as US stockpiles grew by more than expected. On Wednesday, the U.S. Energy Information Administration said crude stockpiles rose 6.3 million barrels for the week ended January 30, almost twice as much as expected. The inventory buildup indicates that the production levels are still high to rebalance the oversupply glut.

Gold and other metals prices settled higher on Wednesday buoyed by the China’s central bank decision to cut the reserve-requirement ratio for banks to free more reserves for increased lending aimed at boosting economic growth.

 

[IFCM]

European markets down second straight day

US markets were traded lower on Friday. Unemployment rate in January rose to 5.7% from 5.6% in December. Non-Farm Payrolls dropped to 257 thousand from 320 thousand. Investors consider the most important thing that for the first time since 1994 Non-Farm Payrolls has been outperforming the level of 200 thousand for 11 consecutive months. They deem it indicates stable economic development and raises the possibility of the Fed rate hike in the second half of 2015. As we have already mentioned, the expected rate hike pushes the US dollar index higher and stock prices lower, as observed on Friday. The Dow added 3.8%, showing the record close since January 2013. The trading volume on US exchanges was 3% lower than the 5-day average and made up 7.7 billion stocks. Major American macroeconomic data is not expected today. US stock indices futures are currently traded considerably lower.

European stock indices are down today for the second straight day. The German statistics released on Friday was negative. German industrial production in December was worse-than-expected. Positive data on German Trade Balance reported this morning has made up for these losses. In our opinion, European stocks are down because of the Greece situation risks. EU Finance Ministers will hold a meeting regarding the economic situation in Greece on February 11. The current loan agreement between Greece and the EU is expired on February, 28. To extend the agreement, the request should be sent by February 16th inclusive. Recall that new Greek authorities insist on writing off the external debt in the amount of 240 billion euro, and not on the debt restructuring as proposed by the European Union. Significant economic data will not be reported today in the EU.

Nikkei upped on Friday as yen weakened greatly against the US dollar following the US labour market data release. Today it has opened with a gap up on positive Japanese macroeconomic data. Stocks of large exporters such as Honda Motor and Nissan Motor added about 1% each. However, after higher opening Nikkei started to fall in tandem with the global downtrend, helped by weak Chinese data. Today at 23:50 СЕТ Q4 Bank lending will be reported in Japan.

Chinese exports in January tumbled 3.3%, while imports plunged 19.9%. Of course, the country posted a record trade surplus. However, investors believe that such trade performance indicates a possible production slowdown. It may drag lower commodity futures, especially copper. Copper imports to China in January amounted to 410 thousand, almost unchanged compared with December figures. Nevertheless, it dipped 24% compared with January 2014.

Crude oil prices slipped following dismal Chinese Trade Balance release. Oil imports in January reached 6.6 million barrels per day, only 0.6% below the level of 2014.

According to the US Commodity Futures Trading Commission (CFTC), last week gold and silver net long positions reduced for the first time over six weeks. Note that a week earlier gold net long position hit the two-year high. Gold prices added 8% in January, the record monthly growth over three years. We deem the possible increased Greek risks may bolster the precious metals demand.

 

[IFCM]

Greek debt standoff weighs on markets

US stocks retreated on Monday as concerns over possible fall-out from standoff between European Union and Greece weighed on investor confidence and market participants digested the disappointing economic news from China. Greece’s government announced plans to cancel about a third of the debt-reduction and economic reform measures imposed as conditions for its international bailout. Investors are concerned that Greece will default on its debt and may even leaver the euro-zone, which will have a negative impact on euro-zone economic growth and may even prompt other European countries to renege on their bail-out promises. The surprise trade data out of China, showing that exports slid 3.3% and imports fell more than 19%, indicate falling demand from abroad and home. On the backdrop of slowing overseas economic growth, US economy is proving resilient as it created 257 thousand jobs in January and more than a million jobs over the past three months, developments which are in line with Federal Reserve’s assessment of steadily improving US economy. More than 60 companies in the S&P 500 will report their earnings this week. Today at 14:20 CET Federal Open Market Committee member Jeffrey Lacker will speak on economy in North Carolina. At 16:00 CET the December Job Openings and Labor Turnover Study results and Wholesale Inventories will be released in US. The tentative outlook is positive with the number of job openings expected to rise from previous month while inventories are expected to grow at a much slower rate.

European stocks fell on Monday as worries over Greek debt standoff intensified and news about disappointing Chinese trade data hit the markets. Greece is considering proposing 10 new reforms at the Eurogroup meeting on Wednesday night in return for a longer bridging loan, to cover its funding needs until the end of August. The euro inched higher against the dollar on Monday, reversing earlier losses as markets appear to have priced in the possibility of Greece’s exit from euro-zone and widened German trade surplus and lower energy costs provided additional support to the single currency. Today at 10:30 CET December Industrial Production and Manufacturing Production will be published in UK. And at 16:00 CET the NIESR Gross Domestic Product for January will come out.

Nikkei is falling today having risen 0.4 percent on Monday. Investors are risk averse as Greece's rejection of its bailout terms spurred concerns over the prospect of financial turmoil in the euro zone. The Japanese yen traded higher against the dollar on Monday as investors moved in to buy yen after it fell against the dollar on Friday.

Oil advanced on Monday for a third straight session, helped by data indicating the number of oil rigs fell last week to the lowest level in roughly five years, marking the ninth straight weekly decline. At the same time, the Organization of the Petroleum Exporting Countries slashed its 2015 estimate for non-OPEC supply growth by 420,000 barrels a day to 850,000 barrels and raised demand forecast for its oil by 400,000 barrels per day to 29.2 million barrels a day in 2015.

Wheat harvests in Australia will produce larger-than-predicted crops in the country’s west and south, adding to the supply of the commodity in the biggest ever world grain production season that began July 1, according to United Nations’ Food & Agriculture Organization. Increasing supplies are pushing prices down.

 

[IFCM]

Optimism about Greek debt deal lifts markets

US stocks rose on Tuesday as investor optimism was buoyed by hopes that Greece and its creditors are nearing a compromise on Greek debt impasse. Equities were boosted by reports about a possible six-month debt extension of Greece’s bailout program, which would allow the country to negotiate a new deal with creditors while avoiding a default. Tuesday report by the Labor Department indicated that job openings in the US rose in December to the highest since 2001 and the number of people hired climbed to the highest level since 2007. Dollar strengthened on Tuesday after hawkish statements by two voting members of the Federal Reserve’s policy committee. Jeffrey Lacker, president of the Richmond Fed, who spoke on economy yesterday in North Carolina, told reporters that a June rate hike was an “attractive option” for him. And John Williams, the president of the San Francisco Fed, said conditions are “getting closer and closer to those where it makes sense to really start thinking seriously about starting this process of normalization.” Today at 13:00 CET Mortgage Applications for the week ended February 6 will be released in US. At 20:00 CET Monthly Budget Statement for January will be released in US. The US Government is expected to run a higher budget deficit compared with the previous month.

European stocks closed higher on Tuesday as market participants’ optimism was boosted by reports of possible Greece deal at Eurogroup meeting on Wednesday. Stoxx Europe 600 gained 0.6% , bouncing back from a slide on Monday. In a reversal of earlier steps, Greek government has announced that it plans to go ahead with the privatization of the country’s main port of Piraeus, as country’s creditors demand. Greece has also backed from earlier demands to write-off part of its debt. After earlier reports about possible quick resolution of the Greek debt crisis, Germany’s Finance Minister Schaeuble told reporters at the Group of 20 meeting in Istanbul that any speculation about a possible six-month extension of Greece’s bailout program was fantasy and no hasty deal would be reached on Wednesday. Germany demands that Greece abide by the existing bailout program. European Union leaders will hold a summit meeting on Thursday, offering an opportunity for more negotiation. A Eurogroup meeting will take place on February 16. So far markets have discounted the possibility of Greek default.

Nikkei fell yesterday on worries about possible fallout from Greek bailout crisis. Japanese markets are closed today for a public holiday.

Oil fell yesterday after advancing for three consecutive sessions. The gains in last three session were driven by expectations that declines in active drilling rigs would help ease the oil supply surplus. But the oversupply still persists, and investors expect the data that will be released today at 16:30 CET to show another weekly increase in US oil supplies to record levels.

Copper fell the most in more than a week after reports on Tuesday indicated China’s consumer prices rose at the slowest pace in more than five years in January while producer prices continued falling. The lower inflation deepened concern that demand will decline in China, the world’s biggest user of industrial metals. Nickel, aluminum, zinc, lead and tin also declined.

 

[IFCM]

Markets mixed in anticipation of Greek debt deal

US stocks opened lower on Wednesday and ended a volatile trading session essentially flat as investors adopted a cautious stance in anticipation of Greek debt negotiations outcome. The broad stock market index S&P 500 closed flat at 2,068.53, while the Nasdaq Composite rose 0.4% due to a 2.3% gain in Apple Inc shares. PepsiCo shares rose 2.5% as the company reported higher than expected earnings and announced share repurchases and dividend increases. The volume of trading on US exchanges at 6.4 billion shares was below the 7 billion average for the last five sessions. The ICE US Dollar Index, a measure of the US currency’s strength against a basket of six major currencies gained 0.2% and closed at 94.9530. Today a batch of economic data will be released in US. At 14:30 CET December Advance Retail Sales, January Retail Sales Excluding Autos, Initial Jobless Claims for the week ended February 7 and Continuing Claims for the week ended January 31 will be published. The tentative outlook is positive for the dollar, with jobless claims forecast to increase by just 9 thousand over the previous week. At 16:00 CET Business Inventories for December will be released, the tentative outlook is neutral with no change expected over previous month’s levels.

European markets retreated on Wednesday as market participants awaited a meeting between the euro-zone finance ministers and Greek delegation. The Stoxx Europe 600 index fell 0.2%. Market participants’ optimism was boosted by a CNBC report late Wednesday that Greek and European Union officials have reached an agreement “in principle” on a plan to rework the country’s bailout. Euro traded higher on Wednesday on hopes of a quick resolution of the Greek debt standoff. Later Reuters reported that Euro- zone finance ministers were unable to agree with Greece on the future of the financial aid, and no joint statement on the next procedural steps was issued after seven hours of talk. The parties are scheduled to meet next Monday, meanwhile the summit of European Union leaders today will provide another opportunity for more negotiation. The single currency will likely trade sideways until an indication that the Greece government fails to come to terms with its creditors and Greek exit from euro-zone becomes inevitable.

Nikkei is rising sharply today as weaker yen boosted exporters, with Toyota rising 1.8 percent and Sony gaining 3.8 percent. The dollar advanced against yen and traded at ¥120.41, its highest level since the closing compared with ¥119.35 late Tuesday.

Oil fell on Wednesday after the US Energy Information Administration said crude inventories rose to “highest level for this time of year in at least the last 80 years”, amounting to total of 417.9 million barrels and marking a bigger than expected increase in weekly inventories. US crude inventories are rising on the backdrop of declining rig counts. The report of the International Energy Agency indicates that the United States will remain the world's top source of oil supply growth up to 2020, even after the recent collapse in prices. It estimates that the build-up of oil inventories around the world due to slowing demand and oversupply will stop by mid-2015 and the markets will start to tighten afterwards.

Gold fell on Wednesday as the demand for the safe haven asset decreased on the back of a stronger dollar.

 

[IFCM]

Finance ministers to meet: European stocks in a range

Global stocks grew further on Friday. Investors continued speculating on the Ukrainian cease-fire. American Dow, S&P 500 and Nasdaq indices marked a weekly gain of 1.1%, 2% and 3.2% respectively, hitting a 15-year high.

S&P utilities lost 1.6% previous week. We believe it reflects investors' growing confidence in Fed Rate hike this year. Utilities bonds are kin to treasury bonds and are considered as safe havens. Earnings were released by 391 companies on S&P 500 list: 71.1% of them outstripped their forecast for gross profit and 57.5% - for net profit. The overall growth made up 6.6%, which is below 11.2%, estimated on October, 1, and above 4.2%, estimated on January, 1. Macroeconomic data turned out to be neutral on Friday. A relatively weak Michigan Confidence was compensated with positive Import Price Index (MoM), slipping by 2.8% in January and reaching high since 2008. Prices have been falling for 7 straight months. Market participants expect inflation in the USA to remain low. Today American stocks are closed due to President's Day. Stock market trade volume on Friday was 11% below monthly average, amounting to 6.5 billion shares.

European indices have been traded in a range for 2 consequent days in expectation of the EU finance ministers' meeting, devoted to Greek bailout. The conference begins today at 14:00 CET. We observe euro slightly strengthening against dollar for the time being. The ATG index dropped by 3.7% today, following the 5.6% surge on Friday. The EU trade balance for December is to be released today. The tentative outlook is neutral. To be noted, positive GDP in Germany and the EU was issued on Friday. Market has not reacted yet, but if the situation in Greece normalizes today, the single currency and European stocks are expected to expand.

Today Japan reported falling Industrial Production for December. Since the growing Q4 GDP (2.2%) had been announced earlier, the pressure against Nikkei was very weak and it is still traded around the 8-year high. Market participants consider Japan to escape recession it has been suffering from since July-September. Forthcoming important data will become public at 6:00 CET on Wednesday after the Bank of Japan meeting.

As we anticipated in our previous overviews, oil continues to soar, boosting futures for wheat, cotton and cacao. Brent has risen by 30% in 3 weeks with no significant pullbacks due to a number of factors. American oil-workers' strike has been continuing for 3 weeks. Kuwait minister of Natural Resources leaves room for oil to advance in the second half of the year on the back of probable production curb. Egyptian air forces delivered a strike against Libyan guerillas after several Egyptian citizens had been executed. On top of that, militants meddle in Libyan energy supplies export. Operating oil wells in the USA have reduced to their lowest number since August, 2011.

Gold futures have been gaining for 3 consequent days amid the Dollar Index retreating. The USA Consumer's Confidence plunged in February to its 11-year low, which was another factor pinning up gold. We do not rule out that the demand for gold will boost shortly before Chinese New year, celebrated next week. However, the trend may appear to be short-termed, affected by low premium on gold ($3-4 per ounce) at Shanghai Gold Exchange, as against London Exchange. Usually at this period the premium makes up $10. In India it slumped from $16 to $2-3 last month.