Dow Jones and S&P500 updated their highs for the third and the fourth time in a row - 10.6.2014

Global stock indices continued their growth on Monday. Moreover, the U.S. Dow Jones and S&P500 updated their highs for the third and the fourth time in a row. The trading volume on the U.S. stock exchanges amounted to 5.35 billion shares, up 6% below the average for the month and 15% lower than the average for three months.

Some of the Asian stocks fell today. Investors reacted to the information from China in the absence of economic news from Western countries. The inflation level in this country peaked in May showing the 4-month high and made 2.5% (YoY), slightly worse than the preliminary forecast of 2.4%. Basically, this contributed to the rise in food prices. Note that the inflation target of the BOC is 3.5%. Theoretically, it is capable to soften its monetary policy for achieving this goal. In our opinion, this can lead to higher commodity prices. Note that the activity in Asian stock markets was not high today. The trading volume on the Tokyo Stock Exchange was the lowest for two weeks. The Japanese Nikkei closed at the weekly minimum. This contributed to the decline in industrial orders in Japan for May, as well as a slight strengthening of the Yen (USDJPY).

Today, we will see the wholesale inventories released in the United States at 14-00 CET for April. We believe that the preliminary forecast is negative. Futures on American stock indexes are now trading "in the red". Note that the S&P500 grew by 5.5% since the beginning of the year and traded with the «price to projected earnings» equal to 16.5 and P/E ratio is equal to 18.6. That is roughly a quarter higher than the historical average. The EU has no significant economic data to be released today.

The Fitch agency has released the Home Depot (HD) review. It notes that the company needs the annual growth in sales at 2% to keep the current market share. Meanwhile, they are about the same level since 2001 despite the increase in retail space by 18%. Note that Home Depot buys their shares through the issuance of bonds. It spent around $1.5 billion from the annual limit of $ 5.5 billion for this purpose; however, such a purchase could not significantly increase the quotations. The shares of the company are traded with the P/E equal to 20.5, higher than the S&P500 index.

The Oil, Brent has been getting higher for the third consecutive day. Market participants expect to its reserve to reduce this week in the U.S. by 1.5 million barrels. Tomorrow, there will be the first OPEC meeting for this year. It is expected to retain the current production level of 30 million barrels per day. Earlier, the representative of Saudi Arabia stated that the increase in Oil production is advisable only if the Brent exceeds $120 per barrel .

The Natgas prices fell. According to the forecast from the U.S. Administration of Energy Information, the shale gas production increased in the United States by 0.5 billion cubic feet in July and reached 40.3 billion cubic feet.

The Corn price has gone down. China rejected the next batch of US grain in volume of 250 thousand tons due to concerns that it is genetically modified and contains the MIR162.

The Soyb slightly stabilized after the strong fall. As we have noted in previous reports, China began selling its soybean reserves of 3 million tons in the domestic market in May. Because of this, the imports fell sharply. Now they have 1.2 million tons of soybeans sold from the reserves and the selling price increased by 4%.

The Coffee got cheaper due to improved weather conditions in Brazil. Meanwhile, according to Bloomberg, its crop in Vietnam could be reduced by 4% to 1.64 million tons this year. The share of the country is 19% of the world coffee production.