By IFCMarkets
On Friday, the US stock market continued to increase. Dow Jones rose, and S&P 500 and Nasdaq updated historic highs. This was contributed by the positive reports for the Q4 of Nike Inc, Philip Morris International and Home Depot companies.
Although the Dow index closed “in the black” on Friday, it could not update the historic high because of a negative outlook for IBM’s annual profit. Its quotes slumped by 4%, which is the highest daily drop since July 2017. The stocks of American Express fell by 1.8% after the report on the first quarterly loss for the past 26 years. Investors shrugged off not only negative corporate earnings information, but also weak economic statistics such as the decrease in consumer confidence index for January by the Michigan University. This morning, the futures on the US stock indices fell. Various US ministries and agencies have ceased to function, as the budget of the previous year expired at midnight from Friday to Saturday, and the new budget for 2018 was never adopted. The Republicans and Democrats could not reach an agreement on a number of expenditure parameters. This is a negative factor for both the US stock indices and the dollar. Note that the US government shutdown occurs not for the first time. From 1977 to 2013, such situation was observed 17 times. The last time a shutdown was observed in 2013 and it did not cause a drop in markets. Today no publication of significant economic information is expected in the US.
On Friday, the STOXX Europe 600 index updated a 2.5-year high. Over the past 12 months, it has grown by 10%. This is less than the growth of the US S&P 500 by 24% over the same period.
According to forecasts, the total profit of the STOXX 600 companies will grow by 10% in 2018, and that of the S&P 500 companies – by 15%. On Mondays, the quotes of the European stock indices almost do not change. The French pharmaceutical company Sanofi announced the purchase of the US Bioverativ biotechnology company for $11.6 bln. It specializes in drugs for the treatment of hemophilia. The Sanofi stocks fell by 3%, dragging the quotes of other companies in the medical and pharmacological sector. The European banking sector fell after a report on the quarterly losses of the Swiss bank UBS (-2.5%). On the background of rising oil prices, the stocks of European energy companies Total (+ 1%) and Royal Dutch Shell (+ 0.8%) are in demand. The euro is increasing against the dollar due to the US government shutdown. This Thursday, on January 25, 2018, the next ECB meeting will take place. Investors do not exclude further statements in favor of tightening the ECB monetary policy. Since the beginning of this year, the euro has advanced against the dollar by 2%.
The Japanese stock index Nikkei slightly decreased on Monday amid a moderately negative trend in world markets due to the risks of shutdown in the US. Nikkei started 2018 with a gap (price gap) on the chart. Accordingly, its level of 23,000 pips can become a technical support. The exchange rate of the Japanese yen is consolidating a little lower of the level of 111 yen per dollar in anticipation of the next meeting of the Bank of Japan, which will be held early in the morning on Tuesday, January 23. No significant statements and changes in the exchange rate are expected.
Brent crude oil prices have been slightly declining for the fifth consecutive day. The aim of the OPEC + was to reduce oil reserves in OECD countries to an average level in five years. The US reserves have already fallen below this average. Market participants do not exclude that the restriction may be canceled in June of the current year. According to the results of the meeting of the OPEC + monitoring committee on Sunday, it was noted that the oil-producing countries would continue to cooperate even after 2018. The active rigs count for drilling oil wells in the US declined by 5 units last week despite expensive oil. Currently, there are 747 units of them compared to 551 units a year earlier. Nevertheless, the US Energy Ministry forecasts an increase in the production of shale oil by 111 thousand barrels per day in February of the current year (the 14th consecutive month).
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