On Thursday indices of U.S. stock exchanges showed a strong negative trend and closed in the red zone. The Dow Jones fell by 0.78% (21287.03), S&P 500 dipped by 0.86% (2419.70), Nasdaq down 1.44% (6144.35). European markets also turned negative in a unified dynamics. The German DAX fell by 1.83% (12416.19), British FTSE 100 slid 0.51% (7350.32).
Today it is expected a few publications of the macroeconomic data and the speeches of the monetary authorities that could affect investors' decisions during the trading sessions.
At 02:30 MSK Basic index of consumer prices in Tokyo in June
At 09:00 MSK retail sales in Germany in May
At 10:55 MSK the change in the number of unemployed in Germany in June
At 11:30 MSK UK GDP for the first quarter
At 11:30 MSK Business investment in the UK for the first quarter
At 12:00 MSK the Eurozone CPI for June
At 15:30 MSK the Canadian GDP for April
At 16:45 MSK the Index of business activity (PMI) in Chicago (June)
At 17:00 MSK the Index of consumer sentiment from the University of Michigan for June
At 20:00 MSK the Number of drilling rigs from Baker Hughes
Yesterday European stock markets were faced with a wave of sales. All the major indexes turned negative, as the result Euro Stoxx 50 dipped by 1.87%. The main reason is a change of monetary policy, announcement of which was made on Tuesday by ECB President Mario Draghi. Reviewed the timing of the tapering of quantitative easing in the Eurozone. Today investors will focus on the publication of Eurozone CPI to determine inflation. The approach to the 2% target can accelerate the process of QE tapering.
On the background of these events the European currency has shown a strong strengthening. For the current quarter Euro increased by 7.3% it was the highest quarterly growth for the previous seven years. It is likely that the climb will continue. For major currency pair EURUSD we can talk about the target of 1.16, but after reaching the resistance level at 1.14 it is possible a technical correction, on which will be fixed part of the profit, as well as finally closing the short positions, and then it will be followed by the opening of a long.
European markets have made a negative external background for the American. A collapse in overseas exchanges was also provoked by the data on consumer spending and the labor market, which was lower than expected. Thus, the number of initial claims for unemployment benefits in the U.S. rose last week by 2 thousand while analysts forecast a decline. The leaders of the fall were again the company's high-tech sector. Capitalization of Microsoft fell by 1.79%, Google dropped 2.46%, Apple shares dipped by 1.93%. At the end of the trading session correction up of companies from the financial sector helped a little. The positive was caused by the results of annual stress tests of the fed. 34 largest banks of the country received the approval of plans for dividends and share buybacks. As a result, the S&P 500 index managed to close within the range of 2420-2450.
It is now possible subsidence of the volatility on the eve of the national holiday of the United States, Independence Day, which will take place on Tuesday next week.
The dollar continues to be weak and it is at the lowest level of 9 months against a basket of major world currencies. This happens against the background of too soft rhetoric of the fed compared to the expectation of tightening monetary policies in the Eurozone, the UK and Canada.
The weak dollar plays a positive role for oil producers, pushing prices up. Also the unexpected decline in US production helps growth. It should be noted that the growth occurs, despite the pressure of many negative factors. As, for example, it is the volume of oil production in Libya, which hit a four-year high with value of 1 million barrels per day.
Sincerely, Global FX chief analyst Sergey Melnikov.