U.S. indices dropped as European and Asian ones rose yesterday | IFCM India
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U.S. indices dropped as European and Asian ones rose yesterday - 30.7.2014

World stock markets maintained the sideways trend on Tuesday. The U.S. indices dropped as the European and Asian ones rose. The statement made by the U.S. President Barack Obama considering new sanctions against Russia was probably regarded by market participants as a factor of the supplementary political risk. The statement was made after the European and Asian stock exchanges had already closed.



The world largest postal service company United Parcel Service (UPS) lowered its annual profit forecast and its stocks fell 3.7%. FedEx quotes dropped 1.6%. Currently, about half of the companies listed on S&P 500 have reported for the second quarter. The earnings forecasts were outperformed by 70% of these companies. It is above the usual average level of 63%. Now investors have raised the growth forecast of S&P 500 total income for the second quarter to 8.2%. The U.S. macroeconomic indicators offset each other yesterday. The Consumer Confidence Index in July rose to its high in October 2007 and reached 90.9 points. Of course, it can be considered as the positive data. However, another indicator, the S&P/Case-Shiller Home Price Index, which is rarely considered, proved to be very negative. In May it passed into negative bias for the first time in two and a half years. The trade turnover on the U.S. exchanges was 5% above the average for the three months. Currently futures on U.S. stock indices are "at zero" level, or at the level of the previous close. They were supported by the good earnings report of the social network Twitter, which was released after the main trading completion.

Today at 12-15 CET the report on labor market for July prepared by the ADP agency is to be released in the U.S. The forecast proves to be quite positive. Let us remind you that it precedes the official data, which is to be announced on Friday. At 12-30 CET the GDP for the second quarter is also to be published today. Its expectations have a strong variation from +3% to +3.7%. It fell 2.9% for the first quarter. Accordingly, we assume that the U.S. dollar depreciation and the stock market correction are possible to happen, if the GDP growth for the second quarter occurs to be less than 3%, and in case it does not offset the first quarter downtrend. At 18-00 CET the Fed is going to announce the ‘QE3’ discount rates. The rate is expected to be maintained at the current level of 0.25% and the purchase is to be reduced by $10 billion to $25 billion per month.



European stock indices are down today, as a negative reaction followed by new sanctions against Russia. This will result in reduced exports of the EU companies. Good reporting contributed to the growth yesterday. The earning reports of 35% of the companies listed in STOXX Europe 600 have already been released. The profit outperformed or coincided with the outlook in 58% of the companies. Now market participants expect the net profit growth of the companies included in this index to 14.2%. Today at 9-00 CET Consumer Confidence, Economic Confidence and Industrial Confidence indices are released in the EU. At 12-00 CET the German CPI for July is to be announced. We expect the majority of the forecasts to be negative.

Nikkei has slightly corrected today, after the 4-day increase. The output reduction for June in Japan by 3.3% has turned out to be at the highest level since March 2011, followed by the strong earthquake. However, the negative data was partially offset by good earnings report of Honda Motor and Tokyo Electron. Currently, about a quarter of the companies listed in Topix index submitted their reports for the second quarter. Their total net profit added 11%.



Wheat prices dropped following the improved harvest forecasts of Western Australia state and Ukraine. The Western Australia state is a major wheat producer in Australia. It raised its crop forecast 12%, or 1 million tons in 2014/2015, according to the CBH Group. An increase in wheat production is expected in Ukraine by 4% to 57.4 million tons, according to UkrAgroConsult agency. It is noted that the export terminals operate as usual despite the military actions on the South-East of the country. An additional negative factor for wheat, corn and soybeans was the rainy weather forecast in the U.S. Midwest by the end of this week, according to World Weather Inc. Currently the region is suffering from the drought. Let us recall that the USDA expects a record soybean crop of 3.8 billion bushels this year, and the second largest corn crop of 13.9 billion bushels. Due to this fact, grain prices dropped heavily and became quite sensitive to weather forecasts.

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