By IFCMarkets
Global stock markets posted gains on Thursday. US stocks rose for a second day ahead of positive official labor market data in December, which will be released today at 13:30 CET. Better-than-expected ADP Non-Farm Employment Change was released on Tuesday. As for yesterday’s data, the number of unemployed for the week dropped by 4 thousand people. It had a positive impact on the financial markets. Note that the weighted average number of the US unemployment claims has been below 300 thousand for 17 consecutive weeks. This is an excellent result, indicating the economic recovery. The volume traded on US exchanges was 6% higher the weekly average and amounted to 7.1 billion shares. According to forecasts, Non-farm Payrolls in December would reach 240 thousand. It will be above 200 thousand for 11 consecutive months for the first time since 1994. The unemployment rate is also expected to decrease to the lowest levels since June 2008, from 5.8% to 5.7%.
The US dollar index was about to hit nine-year high amid positive expectations. Euro was also trying to hit new lows. Now both currencies are indicating retracement movements in the opposite directions ahead the important statistics release. Note that euro tumbled 5.3% for the first time since May 2012 over the last four weeks. The political crisis in Greece and the anticipation of the ECB money printing added negative pressure on the European currency. By the way, the ECB President Mario Draghi mentioned once again about the money issue yesterday. On Thursday Stoxx Europe 600 showed the highest daily increase over three weeks. Now it is going down together with other European indices as German reports have been published today in the morning, which appeared to be worse-than-expected. Industrial Production in November fell for the first time in three months. We don’t expect any macroeconomic data to be announced today in the EU.
Nikkei and yen repeated the dynamics of similar assets. Yesterday we could observe the price surge, so today there is a timid pullback. Two macroeconomic indicators (coincident and leading) released this morning have indicated weak performance. Note that yen weakening has a slower pace compared with euro. It is possible that some investors use yen in carry trade. In theory, it can also influence the strengthening of other currencies, for example Australian dollar. Stable yen restrains the Nikkei growth. Moreover, market participants are not in a hurry to buy stocks ahead of the earnings season of Japanese companies. In our opinion, the meaningful Japanese economic reports will be released only on Thursday next week.
Crude oil prices have been falling to the lowest level since April 2009 for seven weeks in a row. However, the last three days indicated slight advances. Two largest US drilling companies, Helmerich & Payne and Pioneer Energy Services, announced the cancellation of eight contracts for the development of new wells aimed at shale oil extraction. In total, this year they have signed 190 contracts. Market participants believe that about 30% of these deals may be cancelled due to the fallen world oil prices. According to Energy Information Administration (EIA), the US oil production in December amounted to 9.14 million barrels a day, the highest level since January 1983. It is hard to say whether high production level would be maintained at low prices. EIA predicts the average price of Brent crude oil in 2015 would be $68 a barrel, which is much higher than current prices. Now the oil oversupply on the world market is estimated at 2 million barrels a day. This is the main reason for the drop in prices.
Gold prices are up despite the US dollar strengthening and the rise in stocks. In our opinion, this is not quite a typical case. Gold price was close to hit the three-week high. The price is higher $6 on the Shanghai Gold Exchange, compared with London. It means there is a significant demand on the eve of Chinese New Year. SPDR Gold Trust reserves are at the lowest level since September 2008.
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