World markets united in rising - 24.11.2014

World markets rose altogether on Friday. It was caused by the interest rate cut in China and statements regarding the monetary policy easing provided by the European Union.

Dow Jones and S&P 500 hit new highs and closed up for the fifth consecutive week. For the first time in more than two years the Bank of China cut the loan rate to 5.6% and the deposit rate to 2.75%. This was aimed at providing support for the country’s economic development. This year it is expected to be the lowest over the past 25 years and may reach 7.4%. Investors count on the global GDP growth due to the Chinese economy acceleration. On Friday the ECB President Mario Draghi spoke on the increased deflation risks in the euro zone and the ECB’s trim to proceed with the money printing. Note that the annual European inflation rate in October was only 0.4%. Certainly, Mario Draghi’s statement caused the euro depreciation against the US dollar. Despite the boosted indices, the trading volume of the US exchanges was moderate and amounted to 6.5 billion stocks, which is only 2.5% higher than the monthly average. Today there is no significant US data to be released.

European stock indices have continued to climb today in the morning. Market participants believe that the euro issuing could ensure liquidity inflow on the market. The German Ifo Business Climate Index in November has been released this morning. It rose for the first time in six months: this may push the European stocks. Note that Stoxx Europe 600 index upped 11.5% from its October low. Macroeconomic data in the EU is no longer expected for today, but a number of speeches will be given by the ECB officials.

Nikkei ticked up in line with the global trend. In addition, investors reacted positively to the lower house of parliament dissolution and snap elections. The Prime Minister Shinzo Abe proposed to move the sales tax hike (10%) for a year and a half. It did not comply with the opinion of the lower house of parliament, which was subsequently dissolved. Note the continued strong yen weakening as the volume of money issued has recently increased. The Bank of Japan's Governor Haruhiko Kuroda is expected to give his speech tomorrow early in the morning at 1-00 СЕТ.

As the interest rates were cut in China, nearly all the commodity futures jumped in price on Friday. Investors expect strong commodity demand in China to remain.

A regular OPEC meeting will take place on Thursday. The results of this event may affect greatly oil prices. They have tumbled by one third since June and reached the 4-year low. Some market participants believe that if OPEC does not reduce the production, oil could drop to $60 per barrel. The expected reduction of 500 thousand barrels per day is likely to be insufficient. However, if the production cut amounts to 2 million bpd, Brent crude oil could rise above $80 per barrel. In October, OPEC production was 30.97 million bpd. The last production cut happened in December 2008 in the midst of the global crisis: 2.46 million barrels. Recall that at that time WTI crude oil slumped from $147.3 in July 2008 to $32.4 per barrel in December.

Volcafe company raised its forecast for global coffee shortage in 2014/2015 to 10 million bags of 60 kg, compared to 9 million in September. It was mainly caused by the expectations of the coffee crop reduction in Vietnam to 27.4 million bags, from 30 million in the previous season. According to Volcafe, Brazilian crop may reach 47 million bags and 12 million in Colombia. International Coffee Organization also projects a global coffee shortage of 800 thousand tons.