On the last day of the previous week major U.S. stock indices closed in the red zone. Dow Jones fell by 0.04% (19843.41), S&P 500 declined by 0.18% (2258.07), the Nasdaq lost 0.36% (5437.16). European markets looked better than in the U.S. and closed with growth of main indexes. Germany's DAX up by 0.33% (11404.01), British FTSE 100 rose by 0.18% (7011.64).
Today it is scheduled a few of events and publications of macroeconomic data, which may affect investor decisions.
At 12:00 MSK Germany is to release Ifo Business Climate Index for December.
At 17:45 MSK the U.S. is to release Composite PMI by Markit.
At 21:30MSK Fed Chair Yellen Speaks.
Last week, stock indices of the U.S. were in the consolidation range. In particular, the index of wide market S&P 500 was trading above the previously broken the target level of 2250. Low volatility is explainable by the strong growth within the second week of December, after which investors closed part of positions and created new portfolios. Last week there were a number of events which could continue to increase volatility, but this did not happen. Became aware of the agreement OPEC+ on decrease in volumes of oil production, the Fed published the level of key rate and plans for the future. Also on the last day of the week it was reported about the takeover of China underwater drone of the U.S. Navy in the South China Sea. This event could exacerbate already tense relations between the US and China. Dspite all these events, S&P 500 continued to be in consolidation corridor 2250-2277, reducing volatility. Thus, the average change in the triad of major US indexes made up only 0.06 percent. All this may indicate evidence of the strength of the upward trend which will probably continue in the near future. Today, market participants will pay their attention to speech by Fed chair Janet Yellen.
On Friday, European indices continued their growth, with the index of the Frankfurt stock exchange DAX touched year's high, but closed below. The main factor of growth is the weakening of the Euro, which is beneficial for export-oriented companies of the Old World. Investors continue to react to the recent decision of the monetary authorities of the USA and the Eurozone concerning the regulation of the economy. Thus, last week we saw a sign for the European currency.
On Friday, despite the small correction, the quotes on the EUR/USD pair showed a close below the two-year range, the lowest in 14 years. This gives a good signal for a continued move lower despite a possible correction and consolidation, which could be held on partial profit-taking.
Last week, the quotes of futures contracts on WTI crude oil closed below the broken annual maximum. Despite all the positive events in the industry, the growth was fully adjusted. The reasons are many, it is the lack of increase in demand and production growth in the United States, the growth of dollar as well as escalating upward trend in the number of drilling rigs. In itself, the agreement to limit the supply by the leading oil producers carries with it only hope for higher prices in the future, which is already fully priced in. It is now starting to act more market-oriented laws, such as the actual ratio of supply and demand. According to the agreement, the real decrease of oil production will begin in the new year, then stronger movements could be expected.
Sincerely, Global FX chief analyst Sergey Melnikov.