By IFCMarkets
World stock indices move in different directions the second consecutive day. In the U.S. S&P 500 has once again renewed its historical high, meanwhile the Dow and NASDAQ fell. Trade turnover on the U.S. exchanges was the average for the month. Ambiguous macroeconomic data contributed to this kind of dynamics.
Initial Claims indicator has reached its lowest level since February 2006 and amounted to 284,000 people. This is quite a positive indicator for the U.S. economy. Non-farm payrolls index increases monthly by 200,000 for five consecutive months for the first time since the late 90ies. However, the second significant indicator released on Thursday occurred to be negative. New Home Sales in the U.S. fell to its 11-month low in June (8.1%), and amounted $406 million. Initially estimated at 504 thousand homes, the record sales of this index in May were reviewed for a downgrade to 442,000. It should be noted that it is now more important the information on the labor market for a possible Fed monetary policy tightening, so the U.S. dollar continued to strengthen against the euro and other currencies on Thursday.
In general, the data on earnings reports was neutral yesterday, but let us pay more attention to the weak quarterly report of Caterpillar, which caused a price drop of the company by 3.1%. Currently 205 companies listed in S&P 500 (41%) submitted their reports. The profits (68% of the companies) exceeded initial forecasts, and that is higher than the normal average of 63%. Now investors expect the total income growth of the companies listed in S&P 500 for the second quarter by 6.2% and the revenue by 3.3%. Since the beginning of the year the index itself increased 7.6%. After the trade closing the weak quarterly report of Amazon.com was released, and its stocks have tumbled 9%. Today at 12-30 the data on durable goods for June is to be released in the U.S. We believe that the preliminary forecast is positive. This fact partially offsets the negative effect from Amazon.com, and now U.S. futures on stock indices are “at zero”, or at the level of the previous close.
European stock markets rose on Thursday due to the good economic data. The index growth of PMI in Germany and the Eurozone in July outperformed the forecasts. A stock part of the problematic Portuguese bank Banco Espirito Santo, which we wrote about in previous reviews, were bought by investors. In two days its quotes jumped 14%. This fact also contributed to the growth of the Portuguese stock index PSI 20 and the Spanish Ibex 35. Two Spanish banks have released good reporting for the second quarter. Investors believe that all these factors reduces significantly the probability of a banking crisis in Europe. Especially important macroeconomic data in the EU is not expected today. The GDP will be released for the second quarter in the UK: the forecast is neutral. Currently European stock indices are falling down. A few major companies have issued weak statements for the second quarter and, in particular, the French luxury goods manufacturer LVMH Moet Hennessy Louis Vuitton and Danone. They explained this as a demand drop in China.
Today Nikkei closed higher the “technical” boundary of its neutral trend, at a six-month high. Thus, it wins back the growth of global equity markets, which have risen while it was “flat”. A further weakening of the yen after the release of a relatively high CPI in June contributes to this fact. Still the growth of purified CPI slowed down to 3.3% after a the increase of 3.4% in May. This trend coincides with the Bank of Japan target: to reduce inflation to 2%. Japanese companies-exporters benefit from the Yen depreciation now, and it has a good effect on their statements. Regular data on the Japanese economy will come out on Tuesday night.
Coffee and cocoa futures are rising noticeably, following the prices of the “physical” market. Late last week the difference between the cocoa price in Ivory Coast and futures contract on cocoa reached 75 pounds per ton in London. The futures contract updated its three-year high. The price of futures contracts for coffee and cocoa should grow up, according to Intercontinental Exchange, and that would correspond to the real value of the warehouse stock in the London International Financial Futures and Options Exchange and contribute to their volume increase. At the same time growth targets are not named, because the physical market is “non-transparent”. However, it is now more attractive for sellers of real goods than the market. Vietnamese farmers sell old stock and do not hurry to sell a new crop of coffee waiting for a price increase. This leads to an increase in futures prices in London. The world’s largest coffee shop chain Starbucks Corp has entered into fixed contracts for supplying 60% of the required coffee in 2015, and it does not expect any significant decline in global prices due to the drought in Brazil.
Market Analysis provided by IFCMarkets