By IFCMarkets
US stocks closed higher on Friday. Hi-tech Nasdaq hit a fresh high o positive earnings data from Bank of America, JPMorgan and Wells Fargo in Q4 2016. Their stocks advanced up to 2%.
S&P financial sector index soared 17% after Donald Trump won US presidential elections. It outpaced S&P 500 index which added 6% within the same period. Investors expect total earnings of S&P 500 to have risen 6.2% in Q4 2016. S&P 500 is traded with Р/Е of 17 now. This is far above the average Р/Е of 14 for the recent 10 years. High P/E may mean that stocks are overestimated. US dollar index fell on Friday on relatively weak economic data. Retail sales rose in December less than expected. Consumer confidence index by Michigan University dropped in January. Meanwhile, PPI reached its 2-year high in December. US stock markets are closed on Monday on Martin Luther King Day holiday.
European stock indices edged higher on Friday as well as euro. Euro strengthened due to high demand on German 5-year state bonds. Their yield fell to -0.51% for the first time ever which is below the ECB deposit rate of -0.4%.
European stocks advanced on Friday mostly due to positive corporate news. HSBC Investbank raised the target level for Italian UBI Banca, which pushed their price 9.6% up. European stocks began sliding on Monday despite positive external trade data in EU in November. The market activity was low in absence of US investors. Nevertheless, British FTSE 100 hit a fresh high.
Japanese Nikkei followed the trend in global markets. The benchmark advanced on Friday and fell on Monday. Stronger yen had a strongly negative impact on Japanese stock index. Market participants consider it as a safe-haven asset in case of “hard Brexit” and further weakening of British pound. The pound slumped to its 3-month low on Monday ahead of British prime-minister Theresa May speech about Brexit due on Tuesday. The additional positive for yen was the strong data on factory orders for December in Japan.
Global oil prices slightly advanced on Friday and Monday. Market participants doubt that major oil producers will definitely cut oil production. In particular, energy minister of Saudi Arabia Khalid al-Falih doubts that OPEC oil production cuts will last more than 6 months as global oil reserves have already slumped to their 5-year average. At the same time he said that total oil cuts by OPEC and independent oil producers will total 1.8mln barrels per day (bpd). Goldman Sachs investment bank expects oil production to rise in US in 2017 by another 235 thousand barrels. Since the low of 8.5mln barrel last June the US oil production has already reached the current level of 8.95mln barrels a day. This has stopped global prices from further advance.
Gold prices hit a fresh 7-week high on Monday as Donald Trump commented on Taiwan and NATO. Gold holdings in SPDR Trust showed weekly increase for the first time since US presidential elections. Net longs in gold at COMEX rose for the first time in 9 weeks, according to U.S. Commodity Futures Trading Commission.
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