European and Asian stock markets climbing well today


World stock indices dropped for political reasons on Friday. The Russian humanitarian convoy was sent to the south-east of Ukraine without waiting for the complete agreement with the official Ukrainian authorities. Investors feared the armed provocations of the Ukraine military force and the conflict aggravation. However, nothing special happened at the weekend, the humanitarian aid was delivered.

European and Asian stock markets are growing successfully today. Futures on American stock indices are traded “in the black”. The Fed Chair Janet Yellen gave her speech on Friday. Market participants regarded it as a measure of the monetary policy tightening. But it will not happen in the near future, therefore some investors continue to buy stocks. However, their activity is low. The volume of trading on the US stock exchanges on Friday was 20% lower than the 5-day average and amounted to 4.1 billion stocks. The rate hike usually leads to a price drop rather than an increase in prices. The QE3 program is supposed to be completed this October, and the first US rate hike may occur in mid-2015. Due to this data, the dollar consolidation continued. Janet Yellen made a statement in concern to the US economy state, saying that it has been successfully restoring and also noted positive trends in the labor market. New Home Sales for July is to be released in the United States today at 14-00 CET. The outlook is considered to be positive. Moreover, less important economic indicators are about to be published.

On the contrary, on Friday, the ECB President Mario Draghi noted the weakness of the European economy and the need to stimulate it at the expense of negative rates and the euro issue (TLTRO) in the future. Accordingly, the single currency rate fell. Note that the EU inflation rate in July fell to the lowest level since October 2009 and reached 0.4%. This increases the deflation risk, and is considered to be the main argument in favor of the euro issue. According to the European Central Bank, the inflation rate is expected to be close to 2%, but not more. European stock prices are climbing in anticipation of a liquidity inflow. Several tentative indices of the German economy (IFO) are to come out today at 8-00 СЕТ. They are expected to be negative, due to the Ukraine situation and anti-Russian sanctions. You can find more information about the forex market trends by clicking weekly video overview on the IFC Markets website.

As expected, the Japanese Yen continued its weakening against the dollar, the euro and other currencies. Today it tumbled to 7-month low. This helps to increase the income of Japanese exporters and contributes to their stock growth. Accordingly, Nikkei has risen slightly. The heavy rains in the western part of Japan prevented a stronger growth of the index. They can affect seriously the national economy, if they become the cause of flooding. Unlike his colleagues at the Fed and the ECB, the governor of the Bank of Japan Haruhiko Kuroda said that the increase in volume of the economy stimulation (money issue) may occur soon. He noted a positive factor – a fall in unemployment rate to 3.7%.

Sugar prices slipped, as it became known that the weekly volume of net short positions at ICE added 31% and hit the 6-month high. It was reported by the US Commodity Futures Trading Commission.

Corn and soybean prices dropped. The consulting company Pro Farmer released its agricultural outlook. The US corn crop this year expected to be $14.09 billion bushels and the acre yield - 167.4 bushels per acre. Note that the official USDA corn forecast is lower and amounts to 14,032 billion bushels, the acre yield is 167.4 bushels per acre. The US soybean crop may reach 3.812 billion bushels with an acre yield of 45.35 bushels per acre, according to Pro Farmer. This is lower than the official forecast. We believe that a more negative price dynamics of soybean compared with the corn may be explained by a higher proportion of the GMO beans and China's refusal of their imports. Note the wheat prices growth amid the political tension in Ukraine, one of the largest exporters in the world.


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