S&P 500 hits new record while Dow retreats - 30.12.2014

US markets closed mixed on Monday with S&P 500 edging up to another record close, while The Dow Jones Industrial Average retreated from the record close achieved on Friday. Trading volumes were at roughly two-thirds of their 30-day average. Trading is expected to be light throughout this holiday-shortened week. Today at 16:00 CET Consumer Confidence will be released in US by the Conference Board Inc. The tentative forecast indicates increasing consumer confidence which we expect will have a positive effect on US dollar. On Wednesday at 14:30 CET labor market statistics will be released in US. The tentative forecasts for Continuing Claims and Initial Jobless Claims for weeks ending December 20 and December 27 respectively indicate marginal decrease in Continuing Claims while the Initial Claims are expected to increase marginally, which we believe may have a limited negative effect on USD. At 15:45 CET Chicago Purchasing Managers’ Index will be published, the tentative forecast indicating a slight decline in the index. And at 16:00 CET Pending Home Sales for November will be released, the tentative outlook is positive.

The stocks in Europe edged higher as Stoxx Europe 600 posted marginal gains on Monday notwithstanding the Greek parliament’s rejection of the prime minister’s nominee for president. This means the Greek parliament will have to be dissolved and a snap election will be held on January 25. Investors are concerned whether the Greece’s bailout program and austerity measures will continue if the far-left Syriza party wins in the general election. The uncertainty about the bailout program pushed euro to a two-year low versus the dollar. On the backdrop of struggling Eurozone economy the European Central Bank will meet on January 22 amid speculation officials are preparing to consider sovereign-bond purchases as a next stage of expanding the monetary stimulus measures into a full blown quantitative easing program. This sets the stage for continued euro weakness.

The Nikkei is falling today after closing 0.5% down on Monday. As the Bank of Japan is considering additional measures of monetary easing in April after it tripled its buying of exchange-traded funds to 3 trillion yen in October and the government announced a 3.5 trillion yen ($29 billion) fiscal stimulus package to boost the economy on December 27, all indications are that yen will continue falling in 2015.

The ruble fell the most in almost two weeks after the Economy Ministry report indicated that gross domestic product shrank 0.5 percent in November from a year earlier. The performance of Russia’s currency is determined by the price of crude oil, Russia’s main source of export revenue. If the price of oil does not stabilize the pressure on Russian economy and the ruble will continue.

Oil tumbled to the lowest level in more than five years on concerns of global supply glut, reversing early gains after news that oil storage tanks in Libya were set ablaze and the subsequent report by a National Oil Corporation spokesman that fires were extinguished. As dollar strengthens the appeal of raw materials as a store of value decreases, further reducing the speculative demand for oil. According to ICE Futures Europe exchange, hedge funds curtailed net-long positions by 15 percent in the week ended December 23, while they had added to net-longs in the prior four weeks, boosting them to the highest level since July on December 16.