Yesterday, the rally of stock markets took timeout. The indices showed mixed dynamics and closed in different directions. The Dow Jones rose by 0.20% (19796.43), S&P 500 dipped 0.11 percent (2256.96), the Nasdaq fell by 0.59% (5412.54). The European trading floors closed in red zone. Germany's DAX slipped by 0.12% (11190.21), British FTSE 100 decreased by 0.92% (6890.42).
Today it is expected publication of several indicators that can affect investors ' decisions during of trade session.
At 12:30 MSK the index of consumer prices of UK for November it will be published, expected value year-on-year is 1.1%.
At 13:00 MSK in Germany ZEW economic sentiment for December will be published, it is expected that he will be at the level of 14.0.
At 16:30 MSK in America price indices for exports and imports for November it will be published.
In yesterday's trading, the growth that began last week slowed down. Despite the fact that the indices reached their historical highs, the closure was mainly in the red zone. The index of wide market S&P 500 reached its technical target at the level of 2250 on Friday and went into consolidation. The most cautious participants closed some positions and reduced their risks before the Fed's meeting, which will begin today. Tomorrow at the press conference will be reported decision of changes to the refinancing rate. The attention of investors will focus on the rhetoric of the head of Federal Reserve Janet Yelen on further tightening of monetary policy in the near future. Her words can cause increasing volatility in the market.
Another reason for the slowdown of growth yesterday was a tweet from Donald Trump aimed at reducing military expenses, in particular for building jet fighters. "The F-35 program and its cost is out of control," reads the message. The fact that the jet fighter started to produce, without completing its development. This caused a lot of rework, that raised the cost of the program to 400 billion. Thus, the new President begins to fulfill his promise of saving billions of dollars in military and other purchases. The capitalization of the company Lockheed Martin, manufacturer of jets fighter, fell by 4.7% .Other arms manufacturers, who have contracts with the U.S. Department of defense, started to lose its capitalizations. Raytheon declined by 3.14%, General Dynamics loss of 2.59%, Northrop Grumman of 4.16%. The trend could lead to a loss of jobs and worsening employment figures, and as a result slow down the tightening of monetary policy.
Price quotes for WTI after yesterday's upbeat opening with a gap of 2.5 dollars. per barrel adjusted downward, almost completely closing the gap. This can be a technical signal for continued growth. The nearest target is at the level of $ 56,50 per barrel. But we must not forget that the positive from agreement of production cuts, has the flip side. Rising prices are advantageous to investors in shale oil producers, which already are increasing their activity. Last Friday, data from Baker Hughes showed the growth of drilling rigs by 22 units, what is record for three years. If this continues, the optimism may soon disappear.
Sincerely, Global FX chief analyst Sergey Melnikov.