Daily market overview from IFC Markets

[IFCM]

Markets fall as Greek debt standoff continues

European stocks fell on Monday as euro zone finance ministers were holding talks with Greece about the extension of the bailout program. Stoxx Euro 600 slid 0.1% after posting a 1% gain last week. Germany’s DAX 30 index fell 0.4% and the UK’s FTSE 100 index lost 0.2%. The talks on Greek bailout extension broke down after Greek delegation reused to request a six-month extension of its international bailout package, rejecting the extension proposal as "unacceptable". A draft presented by Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, effectively gave Athens an ultimatum by proposing that Athens extend and abide by its current program or the bailout would expire at the end of the month. Greek Finance Minister Yanis Varoufakis said he had been ready to sign a proposal from the European Commission by which Greece would get four to six months credit in return for a freeze on its anti-austerity policies. Greek Prime Minister Alexis Tsipras has refused to ask for an extension of the current rescue bailout program unless Greece’s lenders agree to greater leniency on debt repayments and on austerity measures. According to a senior Greek banker, Greek banks are losing 400-500 million euros every day, and JP Morgan bank estimates that at the current pace Greek banks have only 14 weeks before they run out of collateral to obtain funds from the central bank. Earlier the ECB had allowed the Greek central bank to provide emergency lending to the banks, but a failure to secure an extension could mean the imposition of capital controls. On Wednesday the European Central Bank will decide whether to maintain emergency lending to Greek banks. Market participants seemed confident a compromise would be reached as evidenced by the rise of euro against the US dollar on Monday as negotiations were under way. The single currency declined today as the talks collapsed and is trading at $1.352 within its prevailing $1.1270-$1.1534 range. Today at 10:30 CET January inflation indicators will be released in UK. Consumer Price Inflation is expected to fall to 0.4% from 0.5%. At 11:00 CET February ZEW survey results for Germany and Euro-zone will come out. After a surprise jump in the fourth quarter German GDP the tentative outlook is positive for euro.

US markets were closed on Monday for the Presidents Day holiday. US stock futures are declining today indicating a lower open for US markets. Today at 14:30 CET Empire State Manufacturing Index will be released in US. And at 16:00 CET the Housing Market Index will come out. With the housing market index forecast to record an increase over previous month’s solid reading of 57, the tentative outlook is positive for the dollar.

The Nikkei is falling today after rising to as high as 18,074.26 on Monday, the highest since July 2007. Index heavyweight stocks are falling, while exporters are mixed, with Toyota Motor Corp, Canon Inc falling and Nissan Motor Co advancing.

Oil continues to rise today as IEA warned that the rise of the Islamic State in Iraq and Syria presented a major challenge for the investment necessary to prevent an oil shortage in the next decade.

Copper is falling today on the London Metal Exchange as China reported property price data indicating new-home prices in January fell from the previous month in 64 out of 70 cities.

 

[IFCM]

Hopes for Greek debt deal support markets

US markets advanced on Tuesday on hopes the Greek debt stalemate will soon be resolved. The S&P 500 started the session lower and steadily rose, adding 0.2% and posting the second record close this year. Investor optimism was boosted by news reports that Greece may ask for an extension of the country’s loan agreement on Wednesday. Market participants largely discounted the economic data that came in below expectations on Tuesday. The Empire State Manufacturing Index moved slightly lower but remained in positive territory, indicating improving business conditions. Also, the Housing Market Index fell to four month low at 55, still indicating a favorable outlook of construction in the months ahead. The ICE US Dollar Index, a measure of the dollar’s strength against a basket of six major currencies, fell 0.12% to 94.0880. Today at 14:30 CET January Housing Starts, Building Permits and PPI for final demand will be released in US. At 15:15 CET January Industrial Production, Manufacturing and Capacity Utilization will be published. The industrial production is forecast to rise. The tentative outlook is neutral. And at 20:00 CET the Minutes of the January 27-28 FOMC Meeting will be released. The investor interest will be focused on whether it will contain new information on when the committee plans to increase the borrowing costs.

European stocks recouped early session losses but gains were limited by the uncertainty about Greece’s future in the euro zone. The Stoxx Europe 600 ended 0.1% higher having opened lower after Greece’s new anti-austerity government rejected an extension to its 240-billion-euro ($272 billion) bailout program under the conditions offered by its creditors on Monday. A new meeting of euro-zone finance ministers is scheduled for Friday. Today European Central Bank will conduct a biweekly review of an emergency liquidity assistance (ELA) to the Greece’s banking sector. There is little chance the ECB will not let the Greek banks to continue to use the ELA. The euro traded higher against the pound, yen and dollar Tuesday as economic data showed continued improvement in the euro-zone. The Center for European Economic Research’s, or ZEW, reported that ZEW indicator of German economic sentiment rose in February to 53.0, the highest reading since February of last year. Today at 10:30 CET labor market report will be released in UK.

Nikkei is rising today on hopes a deal on the bailout program will be reached between Greece and its creditors. Today the Bank of Japan’s monetary policy board decided to maintain the monetary stimulus program at the current annual pace of 80 trillion yen ($671 billion), as it was expected, and revised up its assessment of output.

Oil rose on Tuesday recording a gain of more than 9% over the past three trading sessions. The recent rise is the result of a weaker US dollar and increased geopolitical tensions including violence in Ukraine and the Middle East, and volatility tied to crude options expiration. Options on Nymex March crude futures contracts expire at Tuesday’s, which added to session’s volatility.

Gold fell to a six-week low approaching $1,200 an ounce on Tuesday on expectations that demand will fall as Chinese leave for the Lunar New Year holiday, which starts February 19. The market so far is discounting the apparent lack of progress in Greek debt talks, indicating expectations the turmoil will be resolved soon.

 

[IFCM]

Markets optimistic after Greek deal

US stocks ended Monday’s session essentially unchanged. Falling oil prices dragged energy shares down, while news of merger and acquisition deals in pharmaceutical industry helped push health-care stocks higher. The S&P 500 closed flat. The Dow Jones Industrial Average slipped 0.1%, retreating from the record close of Friday. Nasdaq edged higher 0.1%, recording its ninth winning session in a row as Apple stocks rose 2.7% after it said it will invest $1.92 bn to build two data centers in Europe that will run 100% on renewable energy. According to the National Association of Realtors US home resales declined 4.9 % to their lowest level in nine months in January, indicating housing sector is still fragile. The US dollar index rose on Monday. Today at 16:00 CET Federal Reserve Chair Janet Yellen testifies to the Senate Banking Committee. After dovish minutes from Fed’s January meeting showed that the Fed was in no hurry to start hiking interest rates investors are looking forward to the testimony to see if the Fed Chair is still considering raising interest rates at Fed's June meeting. At 15:00 CET the December Case-Shiller Home Price Index will be released in US, at 15:45 the February preliminary Services PMI and Composite PMI will be released by Markit. And at 16:00 CET Consumer Confidence index will be published by Conference Board.

European stocks moved sharply higher on Monday as investor optimism was bolstered by an agreement to extend Greece’s bailout. The pan-European FTSEurofirst 300 index closed at new 7-year record high. Eurozone finance ministers will be discussing today Greece’s list of reform proposals, which will then be reviewed by the European Commission, the ECB and the IMF. Euro is declining today against the dollar after retreating on Monday as Greek government delayed the submission of its reform suggestions until Tuesday morning. Today at 08:00 and 11:00 CET fourth quarter German GDP and January Euro-zone CPI will come out. The tentative outlook is neutral.

Nikkei is rising today while the investors are cautiously awaiting for Federal Reserve Chair Janet Yellen’s comments for clues on when the Fed may start raising the interest rates. The dollar is edging higher against the yen ahead of Janet Yellen’s testimony. With Japanese stocks trading at 15-year highs, an indication that the Fed is still on track for raising interest rates in June may result in a selloff.

Oil prices fell on Monday amid concerns about oversupply and strong dollar. The prices slid after Friday's data from Baker Hughes oil-services company showed a slowdown in the weekly decline in the number of rigs drilling for oil in the United States. Concerns about oversupply exacerbated as Libya’s largest oil field at Sarir and a key oil export terminal in eastern Libya resumed operations on Sunday. Also, over the weekend Union workers walked out of three more US refineries, with growing supplies of crude oil adding further pressure to oil prices as refineries deal with the expansion of the strike of workers.

Heating oil prices rose as the expansion of oil workers’ strike raised concerns over production levels for the petroleum products.

Gold prices declined on Monday as the creditors reached an agreement with Greece to extend the bailout for four additional months, conditional on Greece’s submission of reform proposals. The demand for dollar denominated gold decreased also as dollar continued strengthening on Monday.

 

[IFCM]

S&P 500, DOW, DAX 30 and FTSE 100 score record highs

World stock markets advanced on Tuesday. S&P 500 and Dow Industrials closed at record highs as investor optimism was buoyed by Federal Reserve Chair Jannet Yelen’s testimony to Congress. Yellen said the Fed was considering interest rate hikes on meeting-by-meeting basis and that an increase was not likely for at least the next couple of meetings. She said that the central bank is “reasonably confident” inflation is moving toward its 2% goal, indicating that inflation has surpassed the job market as the Fed’s top priority. Markets interpreted Yellen’s testimony as assurance that rate hike might not occur until the second half of the year. Shares in First Solar Inc. and Home Depot Inc. surged 10.2% and 4% respectively, leading the gains among the S&P 500 and Dow stocks. Economic reports on Tuesday indicated that US home prices rose again in December and activity in the services sector expanded in February at its fastest pace since October, but consumer confidence fell. The ICE US Dollar Index , a measure of the dollar’s strength against a basket of six currencies, declined 0.14% to 94.4410. Today at 13:00 CET Mortgage applications for the week ended February 20 will be released by the Mortgage Bankers’ Associations in US. At 16:00 CET January New Home Sales will be published. The tentative outlook is negative. Also at 16:00 CET Janet Yellen will testify before the House Financial Services Committee.

European stocks rallied on Tuesday after the reassuring testimony of Federal Reserve Chair Janet Yellen and the approval of Greek bailout extension by international creditors. The International Monetary Fund, the European Commission, the European Central Bank and the euro-zone finance ministers on Tuesday approved Greece’s proposed reform measures in exchange for a four-month extension to its bailout program. Later this week the euro-zone member states are expected to sign off on the deal. The Stoxx Europe 600 gained 0.6%, marking the highest close since October 2007. Germany’s DAX 30 and UK’s FTSE 100 both closed at record highs, while France’s CAC 40 recorded its highest settlement since June 2008. Greece’s Athex Composite surged 9.8%, outperforming the broader European equity market. Euro edged higher about 0.1% against the dollar. Today at 10:30 CET January Loans For House Purchases will be released by British Banker’s Association in UK. The tentative outlook is positive for the Pound.

Nikkei snapped a five day winning streak today after closing at a 15-year high in the previous session as investors took profits. Dollar is edging down against yen today following gains the previous day after Janet Yellen’s testimony.

Oil prices fell on Tuesday ahead of the official data on US inventories as the American Petroleum Institute report indicated US crude oil inventories rose by 8.9 million barrels in the week ended February 20. The build-up was bigger than anticipated. Today at 16:30 CET Crude Oil Inventories for the week ended February 20 will be released by the Energy Information Agency.

Gold prices declined on Tuesday but settled off their session low after Janet Yellen’s testimony suggested that it is not likely there will be an interest-rate hike in the next couple of meetings.

Copper prices climbed amid signs that global supplies will tighten as BHP Billiton Ltd, the world’s biggest mining company, announced on Monday it plans to cut back production, joining other miners in reducing capital expenditures.

 

[IFCM]

DOW and DAX 30 inch up to new records

US stocks ended mixed after Wednesday’s session. The S&P 500 inched lower 0.1% while the Dow Jones Industrial Average gained 0.1% to close at record high for the third time this year. Apple shares, which had gained 21 percent since the start of the year, fell 2.6 percent as investors took profits. Hewlett Packard shares fell 10% as the company missed the first quarter revenue target and cut its 2015 outlook citing the negative impact of stronger dollar. Yellen’s testimony on Wednesday confirmed that the Fed is in no harry to hike interest rates. The ICE US Dollar Index, a measure of the dollar’s strength against a basket of six currencies, slid 0.3%. Data released the previous day showed US new home sales in January fell much less than expected. Today at 14:30 CET the January Durable Goods Orders, inflation data as well as Initial Jobless Claims for the week ended February 21 and Continuing Claims for the week ended February 14 will be released in US. The indicator forecasts are mixed. While the CPI is expected to fall reflecting the influence of lower energy costs, the durable goods orders are expected to rise after an unexpected decline previous month. The initial claims are expected to rise to 290 thousand from the previous week’s 283 thousand. And at 15:00 CET the House Price Index will be published. The tentative outlook is negative.

European stocks retreated on Wednesday snapping a six session winning streak as investors weighed mixed corporate reports.The Stoxx Europe 600 slipped 0.1%, with the energy, basic materials and consumer goods sectors all finishing in negative territory. So far in the earnings season, 63 percent of STOXX 600 companies have reported corporate earnings, of which 55 percent have met or beaten profit forecasts. France’s CAC 40 and UK’s FTSE 100 fell 0.1% and 0.2% respectively, while Germany’s DAX 30 gained 4.5 points, marking its 17the record closing of 2015. Euro traded higher against dollar. Today at 09:55 German Unemployment Change and Unemployment Rate will be published. The tentative outlook is positive for euro. At 10:30 CET the fourth quarter GDP preliminary estimate will be released in UK by the Office of National Statistics, the tentative outlook is neutral.

Nikkei is rising today as investors’ risk appetite improved after Fed Chair Janet Yellen’s testimony indicated the Fed is not ready to raise interest rates just yet. Market sentiment was also helped by the news that the Federation of National Public Service Personnel Mutual Aid Associations, which manages Japan's national civil service pensions, will raise its target allocation for domestic stocks to 25 percent from 8 percent.

Coffee prices fell after rains in Brazil improved crop prospects in the world’s biggest producer and exporter. According to a report by Volcafe, the coffee unit of commodity trader ED&F Man, Brazilian output will rise to 49.5 million bags this year from 47 million bags in 2014. A bag weighs 60 kilograms.

 

[IFCM]

Chinese rate cut pinched commodity futures

American stocks and US Dollar Index slid on Friday. The forecast for Q4 GDP was marked down from 2.6% to 2,2%. Chicago CPI and Pending Home Sales turned out to be worse-than-expected. Most investors believe Q4 GDP in US to rise 2.4%-3%. To be noted, US Dollar Index added today due to rate cut in China and the weakening yuan. Today at 14:30 CET Personal Consumption and Spending for January will be released in the US. At 16:00 CET ISM Manufacturing and Construction Spending indices will be issued. In general the tentative outlook is positive.

European stocks have continued their Friday growth driven by two factors: stabilizing economy in Greece after bailout extension and emission of the euro by European central bank, estimated in the current month. Euro Stoxx 50 has jumped 15% since early January showing the best new-year start ever. Estimated overall surge in earnings among Stoxx 600 companies in 2015 can be 3 times as much as among enterprises on S&P 500 list. Besides, Markit and BME issued Manufacturing PMI in Germany today. It has marked an increase for the first time over 5 months. In 11:00 CET Consumer Price Index for February and Unemployment for January will become public in eurozone. The forecast is positive.

Nikkei expanded today underpinned by European stocks and the weakening yuan (Chinese central bank has reduced the rate). Against this background Nikkei has hit its 15-year high. Japanese Government Pension Investment Fund sold government bonds last year in the fourth quarter and bought domestic stocks worth $15 billion. That was another positive factor for Nikkei. The Pension Fund is going to continue replacing bonds with domestic stocks this year.

Rate cut in China boosted commodity futures since market participants believe it will support Chinese economy and pump up the demand for commodities. It should be pointed out that reduced rate weakened the Australian dollar because from now on most investors expect Central bank of Australia to do the same during the tomorrow meeting.

Oil prices added after OPEC reported production declining from 30.27 million barrels daily in January to 29.92 million barrels in February (the production has fallen to its weakest since June, 2014). This is below the introduced quota of 30 million barrels per day. Contraction in supply was caused by declining exports from Iraq and Libya.

Gold edged higher. The Indian finance minister offered to keep custom taxes on imported gold. Earlier they were expected to be reduced 10% before wedding season in May. Premium on gold in India has risen to $5 per ounce. Significantly, the demand on precious metals expanded after Chinese rate cut. According to Commodity Futures Trading Commission (CFTC), hedge funds have reduced their net long positions for gold and silver for 4 consequent weeks. However, the last week contraction has been the lowest in 6 weeks.

Copper posted a 6 week high with net short position still prevailing according to CFTC. UBS investment bank raised next year copper cost forecast from $5500 to $6700 per ton. To be mentioned, copper already costs $5947 at London Metal Exchange and 43280 yuan ($6900) at Shanghai Futures Exchange. We do not exclude that hedge funds will place net long positions this week.

Cold weather in US pushes wheat prices up despite wheat futures position (net short) increased the last week at CBOT. We suppose that weather may dramatically affect the quotes.

 

[IFCM]

US markets rally with Nasdaq ending above 5000

US markets rallied on Monday as investor optimism was boosted by a surprise rate cut by the People’s Bank of China and a series of mergers and acquisitions deals. NXP Semiconductor acquired Freescale Semiconductor for $11.8 billion, Hewlett-Packard bought Aruba Networks for $2.7 billion, and Cardinal Health acquired Cordis from Johnson & Johnson for $1.9 billion. The Nasdaq Composite ended above 5000, a level it had not reached since 2000. S&P 500 and Dow Jones Industrial Average also closed at new record highs. Markets shrugged off the economic data that came in lower-than-expected. As personal income rose 0.3% in January personal spending declined 0.2%, more than expected. This resulted in increase in savings rate 5.5% in January against 5% in previous month. If consumers keep spending less while their income rises this may negatively affect the GDP growth rate. Construction spending fell unexpectedly in January, which may be explained by bad weather. The weaker than expected manufacturing gauge from the Institute for Supply Management for February pointed to a slowdown in manufacturing activity. The next important economic report of the week will be the February employment report on Friday, where market participants’ focus will be on average hourly and aggregate earnings. The dollar traded higher against the euro, yen and pound, helped by the surprise rate cut from the People’s Bank of China. The ICE US Dollar Index rose 0.2% to 95.47. Today auto manufacturers will be reporting their sales figures in US.

European stocks ended lower on Monday giving up gains that followed the release of encouraging economic data earlier in the session. The 0.3% year-over-year decline in consumer prices in February was lower than expected. Euro-zone’s unemployment rate fell to 11.2% in January from 11.3% in December, its lowest since April 2012. The signs of positive developments in euro-zone’s economy point to the prospect of sizable equity gains when the ECB starts its quantitative easing program this month. Meanwhile the Stoxx Europe 600 slid 0.2% with energy shares leading declines after oil prices fell 3.9%. While most European indexes closed lower on Monday, Germany’s DAX 30 hit the 20th record closing high of 2015. Greece’s Athex Composite stock index fell 2.5% amid concerns about the country’s debtAt 11:00 CET euro-zone Producer Price Index for January will be published. The tentative outlook is negative.

Nikkei is falling today as investors took profits following recent record closings. Chip-related shares such as semiconductor-equipment makers outperformed after the Nasdaq closed above 5,000 on Monday, implying strong demand for the semiconductor industry. Exporters were mixed, with Toyota Motor Corp falling 0.6 percent and Honda Motor Co gaining 0.4 percent. Sharp Corp slumped 9.8 percent on news that it is planning to seek aid from its main lenders to prepare for restructuring as it expects losses to mount this year.

Australia's central bank held its interest rate steady today contrary to expectations of another rate cut.

Oil prices fell on concerns of increasing oversupply on the back of news of rising output from Libya. The spread between the West Texas Intermediate crude-oil futures and Brent crude narrowed to just under $10.

Gold prices retreated on Monday, ending a three-day winning streak as rising US stock markets and stronger dollar lured investors away from the safe haven asset.

 

[IFCM]

World markets retreat as investors book gains

US stocks retreated on Tuesday from record highs. Nasdaq pulled back from the psychologically significant 5000 level. The investor sentiment was dampened by lower-than-expected growth in monthly car sales. US sales of cars and light trucks slowed to a ten-month low in February, registering at an annual rate of 16.23 million. Ford and Fiat Chrysler shares declined sharply. Ford Motor Co fell 3.3% after the company reported that its February US vehicle sales fell 1.9% from a year ago. The dollar inched lower against key rivals after strong economic data from Europe indicated that European economies are on the path of recovery. The ICE US Dollar Index, a measure of the dollar’s strength against six of its major trading partners, was down 0.06% on the day to 95.4090. Today at 14:15 CET February ADP Employment Change will be released in US. The tentative outlook is positive for the dollar. At 15:45 CET final Services PMI for February will be released by Markit, and at 16:00 CET the February ISM Non-Manufacturing PMI will be released. The tentative outlook is positive for the dollar. At 20:00 CET the Beige Book will be released.

European stocks fell on Tuesday as investors took profits after better than expected economic data from Germany and Spain. Germany on Tuesday issued data showing retail sales in Europe’s largest economy climbed 2.9% in January over December, beating expectations of a 0.3% decline. Employment report from Spain showed that jobless claims unexpectedly fell by a seasonally adjusted 13,538 in February. The FTSEurofirst 300 fell 1 percent but remained close to seven-year highs reached earlier this week. European stock markets have rallied ahead of the launch of the quantitative easing program as investors anticipate that part of the newly issued liquidity will end up in equity markets. Euro slipped as investors anticipate the European Central Bank will announce the start of the bond buying program at its meeting on Thursday. Today at 11:00 CET euro zone Retail Sales for January will be released by Eurostat. The tentative outlook is positive.

Nikkei is falling today as investors took their cue from Wall Street and are booking gains. Exporters are weaker as dollar inches higher against yen, while Sharp tumbled 6.5 percent after S&P cut its credit rating.

Oil prices rebounded on Tuesday with fighting in Libya and tensions over Iran’s nuclear program raising concerns about global oil supplies. Rival forces in Libya carried out strikes on oil terminals and an airport. Prices were also supported by Saudi Arabia’s decision on Tuesday to raise the official selling prices for its oil deliveries to Asia and US by $1 and $1.40 a barrel. The decision indicates OPEC’s largest exporter is seeing signs of stronger demand. Concerns over market oversupply will likely resurface today as investors will be watching closely for the change in the US inventories in the weekly inventory report from the Energy Information Administration. The report is scheduled for release at 16:30 CET.

Copper prices fell from a six-week high on Tuesday on speculation that China’s Premier Premier Li Keqiang will announce at an annual meeting of country’s leaders a growth target of about 7 percent for 2015, down from 7.5 percent last year, meaning less demand from the world’s biggest metals consumer. Copper prices rose on Monday after China cut interest rates.

 

[IFCM]

European markets rebound as euro slides to 12-year low

US stocks slipped further on Wednesday as markets price in the expectations of a rate hike by the Federal Reserve in June after Friday’s solid job report. The Dow Jones Industrial Average and S&P 500 lost 0.2% each. The two stock benchmarks are both down about 1% for the year as of Wednesday’s close. Expectations of inevitable rate hike by the Fed continued to push the dollar higher against major currencies. The ICE US dollar index, which measures the dollar’s strength against a basket of six rival currencies, rose 1% to 99.68, nearing 100 level for the first time since 2003. Mortgage applications, released yesterday, fell 1.3% following the previous week’s modest 0.1% increase. Today at 13:30 CET February Advance Retail Sales, Initial Jobless Claims for the week ended March 7 and Continuing Claims for the week ended February 28, and Import Prices will be released in US. The tentative outlook is positive. The initial claims are expected to fall to 305 thousand from the previous week’s 320 thousand, sales and import prices are expected to rise. At 15:00 CET January Business Inventories will be published, the tentative outlook is neutral.

European stocks rebounded after two consecutive declines as the depreciating euro lifted exporter stocks. The Stoxx Europe 600 rose 1.5% hitting a multi-year high and Germany’s DAX 30 surged 2.7% to a new record high. The euro fell 1.4% against the dollar to below $1.06 for the first time in 12 years on Wednesday, accelerating the slide towards parity. The cheaper euro has made the exporter goods less expensive for overseas customers and thus driven exporter share gains. European automakers were among the best performers with shares of BMW AG, Volkswagen AG and Renault SA gaining 5% , 4.7% and 4% respectively. Today at 10:30 CET February Trade Balance will be released in UK. The tentative outlook is positive. At 11:00 CET January Industrial Production in euro zone will be released by Eurostat. The tentative outlook is positive.

Nikkei is rising today as investors are positioning themselves before Friday's settlement for Nikkei futures and options contracts expiring in March. Investors who have long positions in the Nikkei futures are chasing the market hoping the futures will settle at a higher price, as the settlement price is calculated from the opening prices of the 225 shares in the Nikkei average on the second Friday of the month.

Today South Korea's central bank cut interest rates to 1.75 % from 2% in a surprise move for the first time in five months. The move came after the central bank of Thailand unexpectedly cut its benchmark interest rate on Wednesday to boost economic growth.

April Brent crude on London’s ICE Futures exchange rose 2% to $57.54 a barrel while West Texas Intermediate fell 0.3% to $48.17 on Wednesday after Energy Information Administration report showed that crude inventories climbed by 4.5 million barrels for the week ended March 6, a ninth straight weekly climb in crude supplies. Potential supply disruptions due to geopolitical tensions in the Middle East and North Africa are the main bullish factors driving Brent’s price.

Gold prices fell on Wednesday to their lowest level since early November as the US dollar continued strengthening on expectations of rising US interest rates.

May copper fell 0.7% to $2.606 a pound.

 

[IFCM]

Markets fall as investors await Fed's decision

US stocks retreated on Tuesday as the Federal Open Market Committee two-day meeting got under way. While the S&P 500 and the Dow Jones Industrial Average fell 0.3% and 0.7% respectively, the Nasdaq Composite inched higher 0.2% as Apple gained 1.7% on news that the company is planning to launch an online television service. Johnson & Johnson weighed most heavily on the S&P 500 with a 1.2 percent decline to $99.89. Today the Federal Reserve policy meeting will conclude and the Fed is expected to drop the pledge to be “patient” before raising interest rates. While some economists expect the Fed will hike the interest rates as early as June citing strong job creation and continued growth in US economy, others think the Fed will raise the interest rates later in the year pointing to low inflation which is far from the 2 percent inflation target. The ICE dollar index rose 0.1% to 99.67 on Tuesday. Today at 19:00 CET the Federal Open Market Committee Statement and Rate Decision will be released and at 19:30 CET Fed Chair Janet Yellen will hold a press conference.

European stocks fell on Tuesday as the ZEW indicator of German economic sentiment came in weaker than expected. The Stoxx Europe 600 on Tuesday fell 0.7%, retreating from a seven-and-half year high. German DAX 30 fell 1.5%. The ZEW economic sentiment index increased to 54.8 in March from 53.0 in February, missing analysts’ consensus forecast of more optimistic reading of 59.4. The ZEW think tank stated that although economic sentiment in Germany remains at a high level, the “limited progress” in resolving the conflict in Ukraine and Greece’s debt crisis is having “a dampening effect on sentiment. Euro inched higher against the dollar for the second consecutive day. No important economic data is expected today in euro zone. Today at 10:30 CET labor market report will be released in UK by the Office for National Statistics. The tentative outlook is positive for Pound with January Average Weekly Earnings forecast to rise while the February Jobless Claims and January Unemployment Rate are expected to fall.

After closing to record 15-year high on Tuesday Nikkei is trading flat today as investors adopted a cautious stance, unwilling to make bets before the Federal Reserve’s decision later today. Yen was largely unchanged against the dollar as it has been since March 9. It is worth noting that as the monetary stimulus program started by the Bank of Japan in October lifted Japanese equity markets the Japanese stocks are trading at a price-to-earnings ratios of 15 times compared to 19 times for the S&P 500.

Oil prices fell on Tuesday. WTI futures retreated for the sixth session in a row as traders expected that coming reports will show another weekly increase in crude-oil supplies. Today at 15:30 CET Crude Oil Inventories for the week ended March 13 will be released by the US Energy Information Administration. Oil inventories are expected to have risen by 4.4 million barrels.

Gold futures settled on Tuesday at their lowest level since early November on concerns that the Fed decision will signal readiness to raise interest rates as early as June, strengthening the dollar further and making the dollar-denominated safe haven asset more expensive and less appealing.

 

[IFCM]

Fed's dovish statement surprises markets

US stocks rallied on Wednesday after the Federal Reserve indicated that the pace of interest rate hikes will be slower than previously expected. The Fed dropped from its statement the reference to being ’patient’ before raising interest rates, but Fed Chair Janet Yellen told at the conference that the change didn’t mean the Fed was in a rush to hike interest rates. Officials cut their median estimate for the federal funds rate at the end of 2015 to 0.625 percent, down from 1.125 percent in December forecasts. Policy makers also downgraded US growth outlook: according to new projections US economy is expected to grow 2.3 to 2.7 percent this year and next, down from the 3 percent forecast for both years made in December. The dollar fell against major currencies. Today at 13:30 CET Initial Jobless Claims for the week ended March 14 and Continuing Claims for the week ended March 7 will be released in US. The tentative outlook is neutral for the dollar. At 15:00 CET the Philadelphia Fed’s Business Outlook March Survey results will be published. The tentative outlook is positive. At the same time the Conference Board Leading Indicator for February will be released, which is expected to remain unchanged.

European stocks rose on Wednesday as UK energy shares climbed after the government presented a budget outline including investment and tax cuts for North Sea oil industry, and construction and materials shares advanced on expectations of a merger deal between French leading construction company Lafarge and Switzerland’s Holcim. The Stoxx Europe 600 rose 0.3%. Euro climbed to its highest level in eight days after the Fed’s statement indicated that it is in no hurry to hike interest rates. Automaker shares fell as investors took profits after the sector’s 30 percent rally this year. Germany’s DAX 30 lost 0.5 % as BMW fell 4.2 % after announcing lower expected earnings than forecasts a year ago.

Nikkei fell today as investors took profits on financial shares on concerns that falling yields on Japanese government bonds after the dovish Fed statement may weaken banking sector. The yen gained one percent against the dollar following the Fed's policy meeting. Three more public funds are expected to announce on Friday they will start investing in Japanese stocks with a common model portfolio in line with asset allocation of the trillion-dollar Government Pension Investment Fund. That would provide additional 3.58 trillion yen ($30 billion) support for Japanese stocks. It is worth noting that GPIF purchases of stocks instead of bonds has helped drive Nikkei to 15-year highs this week, and Nikkei has risen more than eight percent in the past month.

Oil prices rose on Wednesday as the dollar weakened against major rivals after the Federal Reserve statement. The rebound in oil prices will likely be short- lived as no fundamental change has taken place to address the global oversupply issue.

Gold prices advanced on Wednesday after the Fed dovish statement. A major change is expected in gold market tomorrow when the London Bullion Market Association will launch an electronic auction process operated by the ICE Benchmark Administration after the London Gold fix is discontinued. As China is expected to participate directly in setting the new price fix, the price differences between Shanghai and London markets are expected to smooth out.

 

[IFCM]

European stocks pulling back after Friday growth

American stocks expanded on Friday with Nasdaq rising to its 15-year strongest. The American dollar has weakened within a short-term neutral range. Nike added 3.7% due to growing quarter sales. Tiffany & Co (luxury goods seller) shares fell 4% with its quarter sales contracting for the first time over 5 years. Despite the lack of important macroeconomic statistics on Friday, the trade volume on American stocks was half as much as the monthly average amounting to 9.9 bln shares. Today at 15:00 CET Existing Home Sales for February will be published in the US. The tentative outlook is positive for the dollar.

European stocks have been pulling back today following the Friday growth. Pirelli Tires shares gained 2.1% on the report that China National Chemical Corp was going to buy the company for €7.1 bln. It is worth noting that European stocks have shown a sharp surge since the beginning of the year. DAX has increased 22% and may renew its 12-year quarterly record. About a half of goods produced in the EU is exported. The euro which lost 25% boosted exporters' overall profit 10-13%. Today at 15:00 CET ECB chair Mario Draghi speaks before Economic Committee. At 16:00 CET Eurozone Consumer Confidence will be released. Angela Merkel and Alexis Tsipras will discuss economic issues at 18:15 CET.

Nikkei has expanded on Friday and today, growing again to its 15-year strongest. This morning in its monthly overview the Japanese government has increased economic forecasts for the first time in 8 months. In particular, it outlines a moderate economic recovery. To be noted, the yen has ceased rising as Japanese authorities continue monetary stimulus. We remind that Bank of England and ECB are engaged in quantitative easing as well.

Oil has slipped as Saudi Arabia reported it was not going to support the prices alone. OPEC accounts for 30% of oil supply while independent producers make 70%. According to Saudi Arabia, every oil-producing country is supposed to participate in negotiations on drilling quota if they want the prices to rise. It is worth mentioning that the current oil supply by OPEC has declined, as compared to the end of 2014, and has now reached the introduced quota (30 mln barrels daily). And then, due to increased production in the US, the world is oversupplied with from 0.9 to 1.3 mln barrels per day, according to various estimates. That is why market participants expect oil quotes to retreat further. Oil import from Iran to China, which has contracted 3.7% because of overfilled storage plants, may produce additional effect.

While US Dollar Index stopped growing, gold, copper and crop futures have marked a considerable increase. Precious metals expanded due to rising physical demand in India and China. According to US Commodity Futures Trading Commission, virtual bullish bets on gold and silver have been contracting for 6 straight weeks. The net long volume remains sustainable. The copper net long has boosted more than 40% in a week, renewing the 6-month record.

Among crops wheat futures have shown the sharpest growth due to probable drought in the USA, as reported by Commodity Weather Group. Besides, the record forecast for crops in Russia (100 mln tons) may be cut. To be noted, some well-known meteorologists predict possible onset of El Niño this year. This natural phenomenon may dramatically reduce grain crops.

 

[IFCM]

Markets retreat as dollar declines

US stocks edged lower on Monday as the dollar weakened against major currencies. The dollar continued falling after Fed’s statement last week pushed back expectations of interest rate hike as the central bank lowered its forecast of median interest rates to 0.625 percent from 1.125 percent by the end of 2015 and revised downward US growth outlook. On Monday Federal Reserve Vice Chairman Stanley Fischer said that the interest rate hike will likely happen before the end of the year and the pace of interest rate hikes would not be uniform or predictable. He emphasized that the Fed will be making decisions based on economic data and will not be following a predetermined plan. He warned that investors shouldn’t expect a repeat of the 17 rate increases at consecutive FOMC meetings starting in 2004. He mentioned that officials are waiting for the April 3 monthly employment report after two positive reports in the first quarter of 2015. Federal Reserve Bank of San Francisco President John Williams said a discussion should happen mid-year about raising interest rates. The ICE US Dollar Index, a measure of the dollar’s strength against a basket of six rival currencies, was down about 1% to 97.00. Sales of existing homes rose 1.2% in February, less than expected. Today at 13:30 CET March inflation data will be released in US. The tentative outlook is positive for the dollar. At 14:00 CET January Housing Price Index will be published. The tentative outlook is negative. And at 14:45 CET advance Manufacturing PMI for March will be released by Markit. The tentative outlook is negative.

European stocks retreated on Monday from multi-year highs as investors took profits amid worries over Greece. The Stoxx Europe 600 lost 0.9%. DAX lost 1.2 % as automaker stocks slipped with Volkswagen down 3.4 % while Peugeot declined 2.3 %. Euro advanced against dollar. After meeting Greece’s Prime Minister Alexis Tsipras Angela Merkel indicated that Greece still has to secure the approval of international creditors for its economic reform program before any more aid will be released. It was reported earlier that finance ministers could gather as early as March 27 to approve a payment if Greece submits acceptable reform proposal. Merkel gave no indication that the meeting will happen. Today from 9:00 to 10:00 CET advance March Manufacturing and Services PMI for France and Germany will be released by Markit. The tentative outlook is positive for euro. At 10:30 CET March inflation data will be released in UK. The tentative outlook is negative for pound.

Nikkei is falling today as investors took profits after Chinese factory activity in March unexpectedly fell to an 11-month low as indicated by HSBC/Markit PMI release.

Oil prices rose on Monday helped by weaker dollar. The West Texas Intermediate oil May futures gained 1.9% and settled at $47.45 a barrel, the highest settlement for a most-active contract since March 11. May Brent crude oil added 1.1% and ended at $55.92 a barrel. As CFTC data indicate, investors reduced net long positions in WTI for the fourth consecutive week, to 144,000 contracts, the lowest level since March 2013.

April natural gas fell 1.9% to $2.733 per million British thermal units on Nymex.

Gold prices advanced on Monday for a fourth session in a row on back of declining US dollar and amid concerns over Greece’s debt problems.

 

[IFCM]

World markets diverge on better than expected indicators

US stocks fell for the second consecutive day on Tuesday as better than expected economic statistics pointed to increased likelihood of interest rate hike. The US consumer-price index rose a 0.2% in February. CPI recorded the first monthly increase since October as rebounding gasoline prices and rising cost of food and shelter pushed consumer prices higher. Core CPI increased 0.2% for the second consecutive month versus expected increase of 0.1%. New home sales increased 7.8% in February to 539,000 to mark the best month of sales in seven years. US house prices rose 0.3% in January as indicated by the Federal Housing Finance Agency Housing Price Index. And Markit's Manufacturing PMI unexpectedly rose in March to 55.3 from 55.1 in February, recording the highest reading since October. Investors are concerned that improving economic indicators will prompt the Fed to increase the borrowing costs sooner rather than later as policy makers indicated last Wednesday they would be making decisions based on future performance of US economy. The dollar advanced with the ICE US Dollar Index, a measure of the dollar’s strength against a basket of six currencies, gaining 0.1% to 97.1890. Today at 13:30 CET the February Durable Goods Orders will be released. The tentative outlook is positive.

European stocks rose after better than expected business surveys from Germany and France indicated euro-zone economy is on track to recovery and euro’s slide against the dollar resumed. The Stoxx Europe 600 added 0.3%. Markit’s Composite PMI for euro-zone, a gauge of both the manufacturing and services sectors, rose to 54.1 in March, a 46-month high. Germany's DAX 30, which is up about 20 percent since the start of the year, rose 0.9 percent. European equities have rallied since the start of the stimulus program of the European Central Bank to buy 60 billion euros a month in government debt and other assets, which drives euro lower, making goods of European exporters cheaper for overseas consumers. Also, lower yields on bonds make equities more attractive for investment and part of the additional liquidity ECB pumps into the economy ends up in stock markets, pushing equities higher. Today at 10:00 CET March Ifo Business Climate Index will be released in Germany. The tentative outlook is positive.

Nikkei edged up today as investors purchased stocks before they go ex-dividend later this week. Nikkei has added 13 percent since the start of this year as Bank of Japan’s monetary stimulus program has weakened yen and helped boost the revenues of Japan’s export oriented economy.

Oil prices diverged on Tuesday as West Texas Intermediate crude oil for delivery in May inched higher 0.1% on Nymex while May Brent crude on London’s ICE Futures exchange fell 1.5%. The Brent-WTI spread is at $7.72 a barrel. Investors are closely watching the Iranian nuclear deal negotiations, as resumption of oil exports from Iran may further add to the global oversupply of around 1.5 million barrels a day. Today at 15:30 CET Crude Oil Inventories for the week ended March 20 will be released by the Energy Information Administration, further build-up of inventories is expected.

Sugar prices are falling as world market is expected to see a fifth consecutive market surplus for the 2014-2015 crop year. They have fallen more than 85% over the past 5 years.

 

[IFCM]

Markets tumble as investors take profits on bearish news

US stocks tumbled on Wednesday as investors sold off technology and biotech stocks amid worries about expected low earnings in first-quarter earnings season. Profits are forecast to decline for the first time since 2009, and investors booked gains with stocks trading at historically high valuations - the S&P 500 trades at 18.36 times earnings, compared with a trailing five-year average of 15.64 times . The S&P 500 fell 1.5%, declining for three consecutive days with nine out of its ten main sectors finishing sharply lower. Energy sector stocks closed higher as oil prices rebounded after fighting in Yemen intensified. Nasdaq Composite plunged 2.4%, recording the steepest decline since April 2014, while the Dow Jones Industrial Average lost 1.6% and turned negative for the year. Orders for durable goods unexpectedly dropped in February for a sixth straight month, indicating that businesses are reluctant to invest, and first-quarter GDP will be weak. The dollar traded lower against major currencies. Today at 13:30 CET Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is positive. At 14:00 CET FOMC member Lockhart will speak on economic outlook and monetary policy in Detroit. And at 14:45 CET advance Services PMI for March will be released. The tentative outlook is negative.

European stocks fell on Wednesday as euro continued strengthening against the dollar. The Stoxx Europe 600 dropped 1.1%, with only the energy sector advancing. Greece failed to secure a quick cash payment from the euro zone rescue fund. Germany’s DAX 30 lost 1.2% despite the Ifo institute’s better than expected report on business sentiment. The DAX 30 has surged 21% this year helped by depreciating euro since the launch of the European Central Bank’s asset-purchase program worth 1.1 trillion euros ($1.21 trillion). Stronger euro negatively impacts exporters as it makes euro-zone goods more expensive for overseas consumers. German Consumer Confidence index for April came in today outperforming expectations. No important economic data are expected in euro-zone today. At 10:30 CET Retail Sales will be released in UK. The tentative outlook is positive for the Pound.

Nikkei dropped today as investors followed the Wall Street’s lead and sold off semiconductor and hi-tech shares. It is worth noting that Nikkei has recorded 11 percent gains this quarter supported by stock purchases of public pension funds, such as the Government Pension Investment Fund, and weaker yen. Investors expect the wage rises that Japanese blue chip companies announced last week will also underpin the market by boosting domestic consumption, as early data showed an average hike of 3,013 yen in base salaries per month, roughly 75 percent bigger than last year's increase.

Oil prices surged on Wednesday as concerns about oil shipments in Middle East came to forefront with Western-backed Yemen President fleeing the southern city of Aden after militants came closer to seizing the city. Also, expectations that a deal over Iran’s nuclear program will not be reached this week and the dollar’s recent weakness provided additional support to oil prices.

Gold prices rose for the sixth consecutive day after weaker than expected durable goods orders in US indicated lower likelihood of interest rate hike in near term.

Copper prices fell on lower demand concerns after disappointing US orders for durable goods. Copper May futures price has dropped 7.1 percent in the past 12 months amid signs of slower economic growth in China.

 

[IFCM]

Positive EUR/USD mid-term forecast

After the 4-day fall American stocks have increased on Friday due to corporate releases. Intel shares rose 6.4% on the report it was going to acquire Altera (+28.4%). EUR/USD didn’t show remarkable movement. Fed chair Janet Yellen stated that low core inflation and a very slow surge in income make it possible to postpone rate hike. Most market participants expect it to happen in October rather than in July. Making a Forex, forecast we may predict that USD bullish momentum will weaken. 100 level may become a technical resistance line for US Dollar Index.

American macroeconomic data were mixed on Friday: Consumer Confidence outstripped forecasts while final GDP was slightly worse-than-expected. The trading volume on American stocks was 16.5% below the monthly average. During the previous week S&P 500, Dow and Nasdaq lost 2.2%, 2.3% and 2.7% respectively. At 14:30 CET Personal spending for February will be announced. At 16:00 Pending Home sales will bee released. The outlook is positive. Futures on American stock indices and European shares are growing as US Dollar index inches higher.

European FTSEuorofirst has added 1.2% today. At 11:00 CET eurozone Consumer Confidence and Business Climate Indicator were released. Technology companies' shares take the lead, following Intel-Altera merger deal information. However, unsettled Greek question produces a negative affect. Greek ATG has lost 1.4% today Most investors believe that Greece will have sufficient money only til April, 20. The country will have to find the solution to its financial problems up to this moment. Today at 14:00 CET Inflation for March will be announced in Germany. According to our forecast, the deflation risk will be reduced and the data will appear to be positive. European market may show a record growth since 2009.

Nikkei has expanded today together with other stock indices, despite negative Industrial Production in February. Last week Nikkei index declined for the first time, following 10 straight weeks of surge. As we mentioned in our previous overviews, State Pension Fund and private investors allocated their investment in domestic stocks and reduced the share in government bonds. This sounds logical to us, if to take into consideration the continuing monetary stimulus and low bond yields. Tomorrow at 7:00 CET Housing Starts and Construction orders will be released in Japan.

Despite the postponed rate hike, gold quotes have been retreating two consequent days. FRS explains the decision by stating that macroeconomic statistics became better. It is probable that economic recovery together with the inching dollar resulted in gold prices pulling back. Stabilizing political situation in Yemen has put additional pressure on gold. To be noted, mixed sentiment on gold market has increased the number of forward trades to its high since 1999. They are opened by gold-mining companies that are concerned with the probable decrease in prices. In our opinion, that may drive up gold quotes in the future.

Oil prices have dropped today on the back of negotiations on Iranian nuclear programme. That may boost Iranian oil exports. It is worth mentioning that Libya also reported it would raise the supply.

 

[IFCM]

Markets advance as China announces new stimulus measures

US stocks advanced on Monday as investors’ confidence was boosted by announcements of new merger deals and dovish remarks by the head of China’s central bank and new policy measures to stimulate China’s housing market. UnitedHealth Group Inc. agreed to buy pharmacy benefit manager Catamaran Corp for $12.78 billion in cash. Teva Pharmaceutical Ltd. said it would buy Auspex Pharmaceuticals Inc for $3.5 billion. China reduced required down payment for second homes to 40 percent from 60 percent and broadened a sales-tax exemption on Monday for homeowners if they sell after holding a property for two years or more. The S&P 500 and Dow Jones Industrial Average advanced 1.2% and 1.5% respectively. They had lost more than 2 % last week. Economic data indicated that US consumers barely increased spending, which rose a less-than-expected 0.1% in February. This is another sign that US economy slowed in the first quarter. Personal incomes, meanwhile, rose 0.4% in February for the fourth time in five months and the saving rate climbed for the third straight month. Pending home sales for February reached their highest level since June 2013. The ICE US dollar index, a measure of the dollar’s strength against a basket of six major currencies, ended up about 0.6% at 97.98. Today at 13:50 CET Fed’s Lockhart gives welcome at Georgia conference on Monetary Policy and Financial Stability. At 14:00 CET January Case-Shiller Home Price Index will be released. At 14:45 CET Chicago PMI for March will be released. The tentative outlook is positive for the dollar. At 16:00 CET March Consumer Confidence will be released by the Conference Board. The tentative outlook is neutral.

European stocks rose on Monday as investor optimism was bolstered by encouraging economic data, the prospect of more easing in China and sliding euro. The Stoxx Europe 600 index climbed 1.1%. Germany’s DAX 30 index rallied 1.8%, helped by weakening euro. Inflation data showed consumer prices in Germany grew 0.3% year-over-year in March, up from 0.1% in February. Economic confidence in the euro-zone rose markedly in March to the highest level since the summer of 2011. At 07:00 CET retail sales were released in Germany, showing a decline on a monthly basis for the first time since September. At 08:55 CET labor market data for March will be released in Germany. At 10:00 CET March consumer price index for euro-zone will be released by Eurostat. The tentative outlook is positive.

Nikkei fell today as investors took profits on the last trading day of the quarter and the last day of the fiscal year. Notwithstanding a sharp drop last week, the benchmark has gained 2.2 percent for the month and posted its three straight monthly gains. Yen continued the slide against the US dollar, which gained 0.8 percent vs yen on Monday for its biggest one-day rise in more than a month. Tomorrow at 00:50 CET in the morning the Bank of Japan's Tankan survey results will be published. The tentative outlook is positive.

Oil prices are falling today on expectations that a possible deal over Iran’s nuclear program could result in easing of sanctions and increased exports, exacerbating global oversupply.

Gold prices are falling after dropping for two consecutive days on Monday as stronger dollar and rising equities are dulling investor demand for the safe haven asset.

 

[strokey tone]

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