By IFCMarkets
The US stock indices once again updated historic highs. No significant economic statistics came out. Investors reacted to the positive news of the US companies.
Online cinema Netflix managed to increase the number of its subscribers by 2 mln more than expected in the Q4 of the last year. Their total number approached 118 mln people. The company stocks rose by 9% yesterday. This contributed to the growth of all quotes of the so-called “FAANG” Inc: Facebook, Apple, Amazon, Netflix and Google. So far, 68 companies from the S&P 500 list have reported. The profit of 52 of them exceeded preliminary forecasts. Recall that the growth of the total profit of the S&P 500 is expected to be 12.4% for the Q4 of 2017. At the beginning of the earnings season, the growth was forecasted to be 12.2%. S&P 500 is growing strongly and has been traded without a 5% correction for 396 days already. This is the longest, uninterrupted growth in its entire history. The dollar index updated the 3-year low on Wednesday. Investors negatively reacted to the Senate approval of Jerome Powell as the new head of the Fed. They believe that US authorities may be interested in the weakening of the dollar to realize Donald Trump’s “America First” economic program and to stimulate the US production and goods exports. Today at 15-45 CET the Markit Manufacturing PMI and at 16-00 CET the existing home sales will come out in the US.
Yesterday an additional positive factor was the publication of good economic data in the Eurozone.
On Tuesday, the growth of the eurozone consumer confidence index was 2 times higher in January than the preliminary forecasts. Today, relatively weak Markit Manufacturing PMIs for the eurozone and Germany came out. This contributed to a slight decline in the European stock indices. An additional negative was the decrease in the 2017 profit forecast of Suez, which deals with water and waste treatment. Its stocks fell by 16%, dragging the entire European utility sector. JP Morgan decreased the rating of the European Apple supplier AMS. After that, its stocks fell by 7%. The quotes of other European companies from the electricity sector dropped as well. The euro significantly rose and updated its 3-year high. As mentioned above, the Manufacturing PMI dropped and had a negative impact on the stock market, anyway, the Markit Eurozone Composite PMI rose in January to its high since June 2006. This had a significantly positive impact on the euro dynamics. A number of agencies are going to revise up the Eurozone GDP growth forecast in the Q1.
Market participants fear that the strengthening of the yen will decrease the competitiveness of the Japanese exporters. The yen exceeded the psychological level of 110 yen per one US dollar and demonstrated the maximum strengthening in four months. The stocks of Fanuc Corp fell by 3.7%, Nintendo – by 1.9%, Tokyo Electron – by 1.7%. The quotes of the Mitsubishi UFJ Financial Group (-2.1%), Sumitomo Mitsui Financial Group (-1.9%) also dropped. At the same time, the stocks of the real estate companies continued to advance on the background of the strengthening of the yen: Mitsui Fudosan (+ 1.8%) and Mitsubishi Estate (+ 1.2%). Tomorrow morning at 6:00 CET the retail sales data for December will come out in Japan.
Brent quotes have not yet overcome the psychological level of $70 per barrel. On Tuesday, the independent American Petroleum Institute (API) unexpectedly reported an increase in the US oil reserves by 4.8 mln barrels to 416.2 mln barrels over the past week. This may indicate a reduction in demand. The official data of the US Department of Energy on oil reserves will be released today at 16-30 CET. Currently, market participants expect the reserves to reduce by 1 mln barrels.
On Wednesday, soybean quotes corrected down after a 7-day growth amid the drought in Argentina. Previously, its quotes had updated the 6-week high. A slight increase can be noted in corn prices after Informa Economics lowered the forecast of its crop area in the US this year.
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