European stocks pulling back after Friday growth - 23.3.2015

American stocks expanded on Friday with Nasdaq rising to its 15-year strongest. The American dollar has weakened within a short-term neutral range. Nike added 3.7% due to growing quarter sales. Tiffany & Co (luxury goods seller) shares fell 4% with its quarter sales contracting for the first time over 5 years. Despite the lack of important macroeconomic statistics on Friday, the trade volume on American stocks was half as much as the monthly average amounting to 9.9 bln shares. Today at 15:00 CET Existing Home Sales for February will be published in the US. The tentative outlook is positive for the dollar.

European stocks have been pulling back today following the Friday growth. Pirelli Tires shares gained 2.1% on the report that China National Chemical Corp was going to buy the company for €7.1 bln. It is worth noting that European stocks have shown a sharp surge since the beginning of the year. DAX has increased 22% and may renew its 12-year quarterly record. About a half of goods produced in the EU is exported. The euro which lost 25% boosted exporters' overall profit 10-13%. Today at 15:00 CET ECB chair Mario Draghi speaks before Economic Committee. At 16:00 CET Eurozone Consumer Confidence will be released. Angela Merkel and Alexis Tsipras will discuss economic issues at 18:15 CET.

Nikkei has expanded on Friday and today, growing again to its 15-year strongest. This morning in its monthly overview the Japanese government has increased economic forecasts for the first time in 8 months. In particular, it outlines a moderate economic recovery. To be noted, the yen has ceased rising as Japanese authorities continue monetary stimulus. We remind that Bank of England and ECB are engaged in quantitative easing as well.

Oil has slipped as Saudi Arabia reported it was not going to support the prices alone. OPEC accounts for 30% of oil supply while independent producers make 70%. According to Saudi Arabia, every oil-producing country is supposed to participate in negotiations on drilling quota if they want the prices to rise. It is worth mentioning that the current oil supply by OPEC has declined, as compared to the end of 2014, and has now reached the introduced quota (30 mln barrels daily). And then, due to increased production in the US, the world is oversupplied with from 0.9 to 1.3 mln barrels per day, according to various estimates. That is why market participants expect oil quotes to retreat further. Oil import from Iran to China, which has contracted 3.7% because of overfilled storage plants, may produce additional effect.

While US Dollar Index stopped growing, gold, copper and crop futures have marked a considerable increase. Precious metals expanded due to rising physical demand in India and China. According to US Commodity Futures Trading Commission, virtual bullish bets on gold and silver have been contracting for 6 straight weeks. The net long volume remains sustainable. The copper net long has boosted more than 40% in a week, renewing the 6-month record.

Among crops wheat futures have shown the sharpest growth due to probable drought in the USA, as reported by Commodity Weather Group. Besides, the record forecast for crops in Russia (100 mln tons) may be cut. To be noted, some well-known meteorologists predict possible onset of El Niño this year. This natural phenomenon may dramatically reduce grain crops.