S&P 500 and Dow hit historical highs - 6.11.2014

World stock markets rose yesterday. S&P 500 and DJI even hit new historical highs. In general, the sideways trend is observed on the global markets since the beginning of the week, as the US labor market data for October will be released tomorrow.

ADP Non-Farm Employment Change in October was released on Wednesday in the US. The risen number of jobs (230K) appeared to be at the highest level since June and outperformed the forecasts (220K). Currently, investors expect the official data released on Friday to be positive. The Republican Party gained the majority of votes in the US Senate yesterday. This was the reason for energy stocks to jump in prices. Market participants hope that Republicans would get the permission to export the US hydrocarbon material. Nasdaq fell slightly due to weak earnings reports of TripAdvisor and FireEye. Their stocks tumbled 14% and 15%, respectively. The trading volume on the US stock exchanges was 13% below the 5-day average and reached 6.4 billion stocks. Today we expect the release of Initial Claims and Q3 Non-Farm Payrolls at 13-30 СЕТ in the US. In general, the outlook is neutral. The US dollar index is slipping moderately. The euro is rising ahead of the next ECB meeting and its President Mario Draghi speaking at the press conference at 13-30 СЕТ. It has already been reported the issuing money volume would amount to $1 trillion euro. However, most of the market participants believe that the conditions of private bonds purchasing will be revealed at the ECB meeting in December. Today Mario Draghi’s speech is likely to be limited to the ECB forecasts of the EU economic indicators. There is a possibility if that happens, the euro may continue its upward movement and strengthen against the US dollar.

European markets upped less than the US markets. Investors deem that the delay in the ECB program of European economy stimulation would have a negative impact on the financial statements of companies. Currently the earnings reports have been published by approximately half of the European companies. The earnings of 64% of them exceeded or matched the forecasts. Now the European stock indices are falling, as investors do not expect good news and the launch of the ECB economic stimulus at 12-45 and 13-30 СЕТ. Moreover, the German growth of industrial orders in September released in the morning was worse than expected.

Nikkei is now dipping in line with other world indices after a strong growth in last few days. In our opinion, its further rise should be confirmed by good economic data. It will come out only the next Monday late in the evening. Note that some economists have criticized the recent decision of the Bank of Japan to increase the amount of money issued, so that it caused the Nikkei growth.

Grain futures, precious metals, coffee and cocoa continued to fall as the US dollar strengthens and the Chinese economy indicates recession. Amid these events the copper price has fallen. Morgan Stanley lowered 1.1% or 250K tons the copper demand forecast in 2014/2015. According to International Copper Study Group, there was a global copper shortage of 589K tons in the first seven months of this year, and since the end of July there was an excess of 77K tons.

The rainy weather forecast in Brazil given by MDA Weather Services pushed coffee and sugar prices down. Some market participants are even planning to revise downwards their crop forecasts in this country. Cocoa price fell ahead of the rainy weather in West Africa and the Ebola situation stabilization. It has not yet spread to the main cocoa producer, the Ivory Coast.

According to China National Grain and Oils Information Centre, there would be an increase in soybean imports to China in November by 5.81 million tons (+38,3%), and in December to 6.8 million tons (+ 62%), compared to 4.2 million tons in October. There is a possibility it might boost soybean prices by the end of the year.