On Friday, during the last trading session, the stock indices have been showed a single rising dynamics and closed in green zone. The Dow Jones rose by 0.18% (21987.56), S&P 500 added 0.20% (2476.55), Nasdaq grew by 0.10% (6435.33). European stock markets in the first trading session of the week in a single dynamics. The German DAX slid 0.33%(12102.21), the British FTSE 100 fell by 0.36% (7411.47).
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 02:01 MSK the Volume of retail sales BRC in the UK in August
At 07:30 MSK interest rate Decision Australia in September
At 08:45 MSK Swiss GDP for the second quarter
At 10:15 MSK the Index of consumer prices of Switzerland in August
At 11:00 MSK the Index of business activity in the services sector in the Eurozone in August
At 11:30 MSK the Index of business activity in sector of services of great Britain for August
At 12:00 MSK retail sales in the Eurozone in July
At 12:10 MSK Speech by RBA Lowe
At 15:00 MSK FOMC member Brainard speaks
At 17:00 MSK the Volume of industrial orders in the U.S. for July
At 20:10 MSK a Speech by FOMC member Kashkari
On Monday the reason for the sell-off in European markets was the increase in geopolitical tensions around North Korea. On Sunday, the DPRK tested the first hydrogen bomb. In response, South Korea is negotiating with the United States the deployment of aircraft carriers and strategic bombers. There is the opinion that events can begin to develop by scenario of Iraqi-Israeli crisis in 1981. When it was an air strike by forces of the Israeli air force to a nuclear reactor in Iraq, which is able to produce weapons-grade plutonium. The proximity of the military conflict beginning reduces investor risk appetite, which close positions in the stock markets, transferring part of the assets to protective tools.
As stock markets in America were closed, the main reaction of investors was reflected in the futures contracts on the index of wide market S&P 500, which fell at the opening session on Monday for more than 10 points. Despite the fact that the derivative managed to recover slightly yesterday, today the index will open the trading session with a large gap down.
In connection with the publication of negative data on the labor market in America which showed an increase of unemployment, the FOMC may reduce the pace of monetary policy tightening, i.e. interest rate hikes and reducing balance. Now the maximum probability of the next rate decision is in middle of 2018. Against this background, the U.S. dollar continues to weaken. This week the basic currency pair EUR/USD will be under influence of the ECB meeting results, where will be discussed further plans of development of monetary policy.
At the moment it is difficult to discuss about the future perspectives of the energy market. Now America just started to estimate the damage from the recent hurricane Harvey. As it can be seen at first glance the refining infrastructure was damaged greater compared to production. This can lead to a decrease in demand. But, despite of this, oil prices are being kept close to the levels achieved last week. The clarity for investors can bring the weekly inventories statistics, which will be published on Thursday.
Sincerely, Global FX chief analyst Sergey Melnikov