By IFCMarkets

On Thursday global stock markets rose. Investors reacted to the statement of the US Federal Reserve: forecasts on the state of the US economy were raised. The two-day growth of S&P 500 was the highest for three years. In our opinion, this “rally” could be short-lived. Note that the US dollar index has reacted to the news by a significant increase. Strengthening of the US dollar and the rising of interest rates may reduce corporate earnings and trigger a correction of stock indices. However, markets do not pay attention to it and react to improving of the economic outlook by Fed. Yesterday’s growth of Dow Jones industrial was the highest since December 2011. We should note that among high-tech companies Oracle rose up to 10.2% due to good reports. The volume of US exchanges trading amounted to 8.7 billion on Thursday. This is 16% higher than the month average volume. Today significant statistics is not expected in US.

Most of European stock markets opened today with a bullish “gap”, and then a slight correction was observed. Some investors take profits after the rapid growth. Today a significant economic information is not going to be released in EU. Note that a strengthening of US dollar led to the decline of euro. French president Francois Hollande has expressed his interest in weakening the euro as well.

The Nikkei index grew up as other global stock indices continued their growth. We should note a weakening of yen against the US dollar. Bank of Japan kept a monetary emission volume of 80 bln. yen per year. However, Haruhiko Kuroda said about a possible additional easing of monetary policy (increase in emissions yen) in the next year due to lower oil prices . Recall that the purpose is the increase of inflation rate up to 2%. The November inflation data will be released next week on Thursday.

Wheat quotes have corrected downwards from seven-month high. Their previous increase was caused by possible reduce of Russian exports in response to Western economic sanctions. Russia is the world’s fourth exporter of wheat and its supply is estimated at approximately 30 million tons per year. Yesterday Food Organization of the United Nations (FAO) noted that Russia’s influence may be limited. It is expected that world wheat stocks reached fifteen years maximum. Corn quotes grew last few weeks. China approved the import of genetically modified corn. Today, corn and soybeans are adjusted downwards. According to the weekly report of USDA, the volume corn and soybeans exports were at the lower limit of the preliminary forecasts.

Beef futures adjusted upward after a heavy fall. Since early December, the price of frozen beef had fallen by 10%. Today at 19:00 CET a monthly review of USDA will be released. We do not exclude that the F-CATTLE quotes have more potential for further reduction. Note that the price of beef for the year increased by 41%. This reduced the demand for in the US by 9.3%.

Cotton quotes have increased slightly. Market participants noted that, while maintaining very low prices, some farmers may plant cereals the next season in place of cotton crops.

Market Analysis provided by IFCMarkets