By IFCMarkets
US dollar index retreated on Friday while US stocks continued advancing. The index soared more than 6% in recent 2 months which was its record advance since the start of 2015. It reached the almost 14-year high.
Some market participants may have decided to book profits. Weak advance US external trade data for October and falling government bonds prices ahead of Fed rate hike could have been the reason. Stock indices advanced mostly due to the stocks of consumer companies ahead of Christmas holidays and sales. No significant economic data are expected to come out in US on Monday.
European stocks closed near their 2-week high on Monday. Indices failed to surpass the upper boundary of sideways channel. No significant economic news came out. Markets reacted on corporate news.
Stocks of Swiss biotech company Actelion surged almost 17% on the news it may be acquired by US giant Johnson & Johnson. Amid this news pan-European STOXX Europe 600 Healthcare index advanced 1.4%. Today at 17-00 СЕТ the ECB President Mario Draghi will speak which may influence euro and European stocks. As it is, euro is getting stronger amid correction in US stocks. European stock market indices were falling on Monday morning due to heightened risks of Italian banking sector ahead of referendum on December 4th.
Nikkei rose on Friday for 7th straight day. It showed the record winning streak in recent 12 weeks. Main reason was weaker yen which had positive impact on Japanese exporters. Moreover, positive inflation data for October came out on Friday. Consumer price index became positive again which lowers deflation risks. Japanese Government Pension Investment Fund reported it received the income of 2.37bn yens or 7.14% from investments in Japanese stocks in Q3 2016. Profitability of investments in Japanese bonds for the same period was negative (-1.34%). In theory, the fund may raise its share of stocks which will support the growth of Nikkei. The October unemployment, consumer spending and retails sales data will come out early on Tuesday morning in Japan.
Oil prices declined in the global markets on talks OPEC members failed to reach agreement on oil production cuts. Iraq and Iran oppose the deal. Moreover, Russia as the leading non-OPEC oil producer, agreed only to freeze the current production volumes but not to cut them. Investment banks Morgan Stanley and Macquarie forecast that if OPEC does not cut production in course of its meeting on November 2016, oil prices will quickly fall to $35 a barrel. Previously OPEC was going to cot oil production from the current level of 33.64mln barrels per day to 32.5-33mln bpd. Since late April Brent prices have been fluctuating around $50 per barrel while oil rigs count rose by 50%. Higher global oil prices stimulate activity of US shale companies. This raises the rivalry among oil producers and makes OPEC vigilant.
Gold prices fell on Friday. Investors worry the banknote crisis in India may weigh on demand for jewellery in the height of the marriage season which lasts from September to April. Jewellery industry consumes more than half of Indian imports that amount to 800 tonnes of gold a year. At this time India exchanges big banknotes fighting corruption, crime and tax avoidance. The process is going on slowly. This may cause gold imports to fall to 60-70 tonnes in December-January from 182.2 tonnes in the same months of previous marriage season, according to India Bullion and Jewellers Association. Australia raised gold production in Q3 2016 by 3% to 75 tonnes in order to limit negative effect from weakening of national currency.
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