US and European markets decline - 5.11.2014

US stocks declined on Tuesday as the sell-off of energy shares dragged the S&P500 index lower. Investor sentiment was not helped by the news that the European Commission cut its forecast for growth of domestic product for the 18-country euro zone to 0.8% in 2014, from a previous forecast of 1.2%, in the spring. The downward revision of euro zone economic growth rate is the latest indication of slowing global growth after recent data on Chinese Purchasing Managers' Index showing Chinese factory activity unexpectedly fell to a five-month low in October, reinforcing views that the country's economic growth is slowing. The unexpected decision by the Saudi Arabia on Monday to cut oil prices for US resulted in a further slide in oil prices, putting a further pressure on energy stocks. The S&P 500 finished 5.71 points, or 0.3%, lower at 2,021.10. After swinging between small gains and losses the Dow Jones Industrial Average finished the session with a 0.1% marginal gain at 17,383.84. The Nasdaq Composite shed 15.27 points, or 0.3%, to 4,623.64. Most of the companies having published their earnings reports, investors will be focusing on economic data and the ECB meeting on Thursday. The Commerce Department said on Tuesday the trade deficit increased 7.6 percent to $43.03 billion instead of narrowing as had been expected. The surprising spike in the trade deficit is likely to reduce third-quarter growth when the government revises the report later this month. Today at 13:00 CET the Mortgage Applications for the week ended October 31 will be released by Mortgage Bankers Association in US. At 14:15 CET the Automatic Data Processing, Inc publishes the Non-Farm Employment Change in US for October, the tentative forecast is positive. At 16:00 CET the ISM Non-Manufacturing Composite index for October will be released in US, the tentative outlook is positive. At 15:15 CET Fed's Kocherlakota speaks on Monetary Policy in Minnesota, and at 15:30 CET Fed's Lacker speaks on Financial Stability in Washington, while Fed's Rosengren speaks at Conference in Lima.

European stock markets retreated from earlier gains and slumped in late trading on Tuesday after reports that central bankers in the euro area planned to challenge European Central Bank President Mario Draghi over his secretive management style. Investors are concerned that the division within the ECB will negatively affect the European monetary authority’s ability to implement bold policy actions to fight deflation and stimulate economic growth in euro zone. The cut by the European Commission to its growth forecast for the euro zone didn't help bolster investment optimism either. The revised forecasts predict the euro zone economy will expand 0.8 percent this year, 1.1 percent next year and by 1.7 percent in 2016 - a level the Commission had said six months ago would be achieved next year. Across Europe, Britain's FTSE 100 fell 0.5 percent, Germany's DAX dropped 0.9 percent and France's CAC fell 1.5 percent. In Asia, Nikkei surged 2.7% to a seven-year high Tuesday, after the Bank of Japan’s surprise decision on Friday to expand bond purchasing program to ¥80 trillion (around $700 billion) annually from ¥60-¥70 trillion.

Oil continued falling as expanding supply outpaces consumption growth limited by slowing global economy. West Texas Intermediate crude oil for December delivery declined as much as 45 cents to $76.74 a barrel in electronic trading on the New York Mercantile Exchange and was at $76.81 at 3:10 pm Singapore time. The contract lost $1.59 to $77.19 yesterday, the lowest close since October 2011. Brent for December settlement slid as much as 73 cents, or 0.9 percent, to $82.09 a barrel on the London-based ICE Futures Europe exchange. Prices are down 26 percent in 2014. The major producers are not willing to cut production. According to the US Energy Information Administration, oil output in US increased to 8.97 million barrels a day through October 24, the fastest pace in more than 30 years. Saudi Arabia cut its December sales price for Arab Light crude to the US Gulf Coast by 45 cents a barrel, a company statement on November 3 showed. This move is interpreted as a signal Saudi Arabia will be fighting for his US market share, defending it from shale producers. Saudi Arabia’s Oil Minister Ali Al-Naimi is scheduled to attend a climate event in Venezuela starting on November 6, according to embassy officials in Caracas. As experts note, the Saudis are trying to bring OPEC’s smaller members in line before the group’s November 27 meeting in Vienna.

Corn dropped for a third day to reach a one-week low on speculation that dry weather in the U.S. will allow farmers to accelerate harvesting of a record crop. The contract for December delivery lost 0.7 percent to $3.62 a bushel on the Chicago Board of Trade, the lowest level since October 28. Soybeans for January delivery retreated 0.3 percent to $10.07 a bushel after dropping 1.9 percent yesterday. About 83 percent of soybeans were harvested as of November 2 from 70 percent a week earlier, matching the five-year average. Wheat for December delivery fell 0.2 percent to $5.2925 a bushel after declining 1.4 percent yesterday.