The global stock market showed a slight decrease in quotations on Wednesday


29/5/2014

The global stock market showed a slight decrease in quotations on Wednesday. Prior to this, the S&P 500 had its historical maximum updated for three consecutive days. Probably some investors decided to take profits. The round turn in the U.S. exchanges was as same as on Tuesday.

There were no significant macroeconomic data coming out in the U.S. yesterday. But today, they are going to appear but may disappoint market participants. We will see the first quarter GDP in the second reading and the weekly unemployment data coming out at 12-30 СЕТ. Afterwards 14-00 CET we will find out about the housing market information concerning pending transactions. In our opinion, most of the forecasts are negative for the stock market. Except for the labor market indicators for this week that may be relatively not bad. Recall that the basis of the previous growth was the idea that the Fed would not raise rates in the near future and would keep the monetary stimulus up for the U.S. economy. In this regard, the U.S. 10 yrs government bonds yield plummeted to its lowest level since July of last year at 2.44%. Market participants were actively switching the focus on stocks. Now, there are positive economic data necessary for the U.S. stock market continued growth, however they are not expected. Now the U.S. futures indexes are back "in black". So, a part of market participants believe that the actual data can be better than expected.

COP Price Chart

The ConocoPhillips (COP) stocks refreshed historical highs after a number of U.S. brokerage firms raised recommendations for them. In particular, Guggenheim Securities expects $90 per share, versus the previous estimate at $82. Yesterday's high on securities totaled $80.5 for ConocoPhillips. In our opinion, the company is slightly overvalued on fundamentals. Since the current high prices include a contract for production of hydrocarbons in the North Sea that has not increased revenues according to the statements for the first quarter of 2014.

The European stock indexes were slightly fluctuating this morning near multi-year highs. No significant economic information is expected in the EU. Market participants are likely to react to American statistics. Expectations of ECB rate cuts next week, support the European stock markets significantly.

Japanese Nikkei has grown today in spite of the collapse in retail sales for April to 13.7% that is the maximum level of 14 years. This was due to increase in sales tax from the 1st of April. Investors expect important macroeconomic data, to be released in Japan tonight at 20-30 CET: inflation, unemployment and industrial production for April. According to preliminary estimates, the data may be positive for the stock market. We should pay attention to inflation especially. According to the Bank of Japan, its increase can stimulate the economic growth.

Brent Oil Price Chart

OIL, BRENT prices dropped. Today at 15:00 CET, we will see the weekly data on its reserves in the U.S., which may affect the quotations. According to American Petroleum Institute, the reserves in Cushing inventories will be decreased by 1.5 million barrels. While total U.S. crude oil reserves will rise by 3.5 million barrels to 383.9 million, gasoline inventories will be decreased by 1.4 million barrels. We do not exclude the growth in the Oil prices if the official data from the Energy Information Administration coincide with such projections or turn out to be a little worse. Note that today there will also be the information on gas reserves (NATGAS). As we have noted in previous reviews, natural gas is going up due to the deal between Russia and China, and difficulties with the Russian gas transit to Europe via problematic Ukraine.

COFFE Price chart

The COFFEE prices increased slightly after the USDA crop forecast for Vietnam. It is expected to be at 29.2 million bags in the season 2014/2015 vs. 29 million bags in the season 2013/2014. In other words, increase may be insignificant. An additional factor for the price stabilization was the coffee production forecast for Indonesia from the International Coffee Organization, for the season 2013/2014 (including reserves). It is expected to be at 11.67 million bags. This is considerably less than 13.04 million bags in the season 2012/2013.




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