The economic situation in America has markedly improved in the second quarter | IFCM
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The economic situation in America has markedly improved in the second quarter - 30.5.2014

The world stock indices rose on Thursday. Investors ignored the weak U.S. GDP data for the first quarter in the second reading (-1%), which were much worse than expected (-0.5%). They believe that it is a consequence of the extremely cold winter. Note that the reduction of the U.S. economy in January - March was for the first time in three years.



Being based on more recent macroeconomic information, investors believe that the economic situation in America has markedly improved in the second quarter. Therefore, a positive reaction to the decline in weekly unemployed data led to the growth of quotations. Average unemployment for 4 dropped to its lowest level since August 2007. An additional positive was the increase in Pending Home Sales in the real estate market for April. Their volumes, though lower than forecast, but still grew for the second month in a row. Previously, the pending Home Sales declined within eight consecutive months. In order to understand the current economic trends in the U.S., we want to announce the U.S. GDP growth forecast for the second quarter. The Citi Bank believes that it will be 4%. Goldman Sachs expects the GDP growth of 3.9%. We believe that if the forecast is justified, one might talk about the hypothetical possibility of the U.S. economy recovery. However, there is 1.5 months left before the data release. Therefore, we would better follow the current economic situation in the United States to predict the stock market. It should be noted that the quotations are growing at a low trading volume on the U.S. exchanges. Yesterday it was 4.88 billion shares, which is considerably less than the monthly average at 5.78 billion. We expect the data on personal income and spending to come out in the U.S. at 12-30 SET, the business activity index from Chicago at 13-45 CET and the consumer confidence index from the University of Michigan at 13-55 CET. In our opinion, the preliminary forecasts are negative. Futures on American stock indexes are "in red" now. But there were the weak data already expected twice this week, which proved to be good in fact. Let us discuss what we are having for today. Besides the economic information, there will be two press conferences of the Fed Regional Directors.



European stocks generally rose yesterday after the U.S. stock market. Since the EU had no important economic information released. Today they are reduced due to the negative influence from the banking sector. The U.S. Department of Justice has decided to fine the French bank (BNP Paribas) at $10 billion, accusing it of violating sanctions against Iran. Only German Index DAX is trading "in black" due to an increase in retail sales in Germany for April YoY by 3.4%. This is the highest since June 2012.

Nikkei is the narrow neutral trend of the fourth day in a row. This week, it reached 1.8% and 2.9% MoM. Investors are confused. Perhaps they are waiting for concrete steps by Japanese authorities. In full accordance with " abenomics ", core inflation in April soared to 3.2%. This is the maximum growth since February 1991. Growth of core CPI in Tokyo for May, which usually precedes the inflation data for the entire Japan, was the highest since April 1992 and made 2.8%. Now, according to the logic of the Japanese government, the economic growth in the country must be started. Earlier, the Bank of Japan announced that it will stop the emission when the inflation level reach 2%. It is difficult to say what will happen in reality. In principle, high inflation for Japan is good. It will be easier to reduce the national debt for the government. We want to note that early on Monday morning at 1-35 CET, we will see the PMI manufacturing in Japan for May in the second reading. It can affect the Yen and the Nikkei, if it turns out to be different from 49.4 points in the first reading.



Today we will see the weekly report from the Ministry of Agriculture (USDA) coming out in the United States at 14-30 CET that provides information concerning various agricultural commodities. In particular, investors predict that the COTTON exports from the U.S. for this week will be not less than 200 thousand bales. On these expectations, the Cotton price was the highest for the month on Thursday. The USDA report may affect other commodity futures.
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