US stock indices get close to historic highs

The large-scale Fed’s emission, aimed at stimulating the US economy affected by the Covid-19 pandemic, became the main reason for the US dollar index declining today for the 7th trading session in a row. The regular Fed meeting will be held on June 10. Now investors believe the current 0-0.25% rate range will remain unchanged at least until March 2021. The euro is actively strengthening before tomorrow’s ECB meeting. Today it exceeded the psychological level of 1.12. The ECB  is expected tomorrow to approve the Pandemic Emergency Purchase Program, which is designed to help EU countries with weak economies. The volume of the program is 750 billion euros. Such emissions are unlikely to hurt the euro, since inflation in the Eurozone in May, in annual terms, was only 0.1%. This is far below the ECB target level of 2%. The Australian dollar today updated a 5-month high, but could not overcome the resistance level of 0.7. Australia’s GDP in the 1st quarter of 2020 fell by only 0.3% compared with the 4th quarter of 2019. In annual terms, GDP grew by 1.4%. This is a good result, as most banks and rating agencies expect that the Australian economy will collapse by 5-10% for the whole of 2020. Tomorrow morning a lot of important economic data on Australia is to be released, including trade balance and retail sales for April.

On Tuesday, US stocks demonstrated excellent growth. The sectors that lagged earlier, such as Oil & Gas, Basic Materials and Industrials, once again became the growth leaders. The Nasdaq, S&P 500 and Dow stock indices have only 2%, 9% and 13% respectively to reach their historical highs. Such a rapid recovery of the market is due to investors’ expectations that the Fed’s monetary emission will quickly solve all the economic problems that arose as a result of the coronavirus pandemic. This morning, US stock indexes futures continue to grow in the hope of a positive report on the US labor market in May from an independent agency ADP. Official data and Non Farm Payrolls will be published on Friday. Today, almost all European and Asian stock indexes rose thanks to the positive Markit Composite PMI of the Eurozone and Caixin Composite PMI of China. Renault SA car manufacturer’s shares soared by almost 8% after getting a soft loan of 5 billion euros from the French government.

Oil quotes keep growing for the 5th day in a row. The Brent price exceeded the psychological level of $ 40 per barrel in anticipation of the agreement that OPEC + countries will extend the current restrictions on oil production until September. Recall that the total quota for the reduction in oil production of the participating countries is 9.7 million barrels per day (BPD). It was adopted on May 1 for 2 months only. After that – from July to December 2020, the reduction in OPEC + oil production will decrease to 7.7 million BPD, and from January 2021 until the end of April 2022 – to 5.8 million BPD. Tonight, an independent American Petroleum Institute will release weekly US oil reserves data. Reserves are expected to decline by 483 thousand barrels. IHS Markit estimated current oil consumption in China at 90% of the “pre-coronavirus” level. All this also supports oil quotes.

Gold is getting cheaper for the 2nd consecutive day. The All India Gem And Jewelery Domestic Council does not expect a quick recovery in demand for jewelry gold in India. This country is the 2nd largest gold consumer after China. Previously, UNICEF predicted an increase in the number of poor in the world by 15% due to the coronavirus pandemic. This could significantly reduce the demand for jewelry gold. Another negative factor for precious metals market was the collective opinion of investors that the Fed would not introduce negative rates in the near future. Previously, such rumors were present in the market.