By IFCMarkets

US stocks and US dollar index edged lower on Friday. The macroeconomic data were weak as of Wednesday and pushed the indices down. The March industrial production fell for the 6th time in recent 7 months. The Michigan University consumer price index fell to the lowest since last September. Moreover, iPhone 6S sales declined and the Apple stocks lost 2%. According to the forecasts, the total earnings of S&P 500 components are to contract by 7.8% in Q1 2016 compared to the Q4 2015. Meanwhile, the index itself is more than 1% above the Q4 2015 level. Such a divergence between total earnings forecast and quotations may trigger price correction in case the negative expectations come true. The US GDP growth outlook for Q1 is 0.2% which is far below the Q4 reading of 1.4%.

On Monday US stock index futures are retreating mainly on poor performance of such energy companies as Chevron (-1.8%) and Exxon (-1.6%). The global oil prices tumbled almost 7% after OPEC and independent oil producers failed to agree on oil production cuts on April 17. The additional negative for the global markets was the lowest since 2010 Chinese GDP growth by 1.1% in Q1 from the previous quarter which is far below the expected 1.5% increase. No significant economic data are expected today in US except for the earnings reports by IBM and Netflix. Pepsico reported lower quarterly sales which has not yet affected its stocks prices.

European indices opened with a huge gap down today but are rebounding now. The stocks of energy providers Royal Dutch Shell, Total and Eni fell around 2% amid lower oil prices. On the other hand, the news pushed up the transport and touristic stocks such as TUI (+3.8%). As a result, the pan-European Euro STOXX 50 index fell marginal 0.3%. Today in Eurozone no significant economic data are expected. The investors will focus on the next ECB meeting results due this Thursday. The pan-European Stoxx 600 index’s P/E is 15.6 which is about 20% above the average P/Е in recent 5 years. We believe the complete retracement on European exchanges may develop only together with the US stock market.

Nikkei index slumped more than other world indices as besides the global downtrend it felt the negative impact of the Japanese earthquake. Given the risk of damaged industrial sites the Sony and Toyota Motor stocks and the insurers Dai-Ichi Life Insurance and Tokio Marine Holdings stocks were the bottom performers. The yen is edging slightly lower. The G-20 financial ministers did not support the idea of probable interventions from the Bank of Japan. The significant external data will be released on Wednesday morning.

Oil edged lower amid failed negotiations of OPEC and independent oil producers on freezing oil production. Nevertheless, the prices did not slump as Kuwait cut the oil production on a strike. The following OPEC meeting it scheduled on June 2.

Gold is advancing for the second straight day. Investors consider it again as a safe-haven asset amid global and US economic uncertainty. According to Commodity Futures Trading Commission, the net longs in gold rose in a week by 12% while the total longs reached the highest since 2012.

Market Analysis provided by IFCMarkets

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