By IFCMarkets
Investors refrain from operations on the currency market ahead of the next Fed meeting.
The American stock index S&P 500 has again updated its historic high according to the results of yesterday’s trades. Its growth was supported by positive corporate and economic information. The fast food restaurants chain McDonald’s reported the highest growth of sales in 5 years. Its prices rose by 4.8% setting a new historic high. The industrial technology producer Caterpillar increased the sales forecast in the second half of this year. Thanks to this, its stocks advanced 5.9%. So far, about a quarter of the companies from the S & P 500 list reported for Q2, 2017. Their overall financial performance was so good that currently market participants expect a 9.1% increase in total gains, rather than 8% as expected at the beginning July. An additional positive factor for the US stock market was the growth of the consumer confidence index to 121.1 points for July. This indicator is close to the 16-year high recorded in March of this year (124.9 points). On Tuesday, the trading turnover on the US exchanges was by 13% higher than the average for the last 20 trading sessions. Yesterday the US dollar index updated its 13-month low, but then returned to the opening level and almost did not change at the end of the day. Investors refrain from active operations on the currency market ahead of the next Fed meeting. It will be held today at 20-00 CET. No rate changes are expected, but the American regulator representatives may comment on the country’s economic state. In addition, the Fed may give explanations about the plans to reduce $ 4.5 trln bond package on its balance sheet. According to the Fedwatch interest rate futures quotes, the probability of a Fed rate hike is less than 50% in 2017.
On Tuesday, the European stock indices rose for the second consecutive day.
The above-mentioned was supported by positive corporate reports, as well as the growth of IFO economic activity indicators in Germany. In particular, thanks to the improved financial indicators, the stocks of the British media group Informa rose by 2.7%. The Raiffeisen bank profits tripled in the second quarter, which led to an increase in its quotes by 6.8%. The stocks of the mining company Antofagasta rose alongside with copper prices. This morning, the European stock indices continued to rise. The leader of the growth is the energy sector due to rising oil prices and the reports of the oilfield service company Subsea 7 and oil-producing company Tullow Oil. The stocks of the European banking sector declined after a report about a cyber-attack on UniCredit Bank. Until now, about a quarter of companies reported for Q2, 2017. Out of these, 40% exceeded forecasts, while 48% – had worse indicators. Moreover, the indicators of the 86% of the companies reported appeared to be worse than expected in the European industrial sector. Today the euro updated its 2-year high against the dollar, but its upward movement did not continue. Market participants expect the Fed meeting minutes. The Swiss franc fell to the 18-month low against the euro. Its 2-day decline was the highest since April this year. The main reason for this was the possible increase in the ECB rate next year.
Nikkei grew on Wednesday. After a good forecast of the indicators for the industrial technology producer Caterpillar, investors began to buy the stocks of the similar Japanese companies. In particular, the Komatsu stocks rose by 2.7% and Hitachi Construction Machinery – by almost 3%. This morning, the business confidence indicator in small business for July was released in Japan. It exceeded expectations. Let’s note that the stock index of Japanese small companies Nikkei Jasdaq has been growing for the 6th day in a row. It is possible that this trend will spread on the entire Japanese stock market. The yen shows a slight weakening ahead of the US Fed meeting. Let us recall that last week the Bank of Japan announced the continuation of the current ultra-loose monetary policy.
The oil prices got an additional stimulus to grow in the form of another decline in its reserves in the US. Market participants believe that this indicates a high demand. According to the American Petroleum Institute, oil reserves in the US fell by 10.2 mln barrels over the past week. This is much higher than the preliminary forecast of minus 2.6 mln. Official data on the US oil reserves will be released today at 16-30 CET.
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