Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices did not show a definite trend. Today’s session will be marked by two events, which the outcome financial markets consider little prone to surprises. At 9:00 am starts in Vienna OPEC meeting. Since the unsuccessful meeting in April, the environment did not change significantly. At the time, the cartel countries failed to reach an agreement to freeze the production, to the extent that Iran vehemently stated not want to participate in this initiative, and that Saudi Arabia had imposed as a condition widespread participation of producers. Since then, relations between the two countries has not improved, on the contrary, were exacerbated after Saudi Arabia have hindered access to Mecca to Iranian pilgrims. The latest data have pointed to a rise in crude production by various producers in the Persian Gulf (mainly by Iran and Iraq), which undertakes an intention to reach an agreement. The main novelty and potential meeting surprise of focus will be the participation of the new Minister of Saudi oil, Khalid al-Falih, after 21 years of “reign” Ali al-Naimi. Khalid al-Falih is the change to succeed in the United Arabia, headed by Prince Mohammad bin Salman. The ECB meeting will be surrounded by a more favorable environment than that observed in previous meetings. The European economy continues to grow (albeit moderately) after the turbulent beginning of the year, oil has been recovered (making a significant contribution to the objective of the ECB’s inflation), financial markets have stabilized and the standoff between the EU and Greece appears to have been overcome. Thus, at present, the ECB seems to be focused on the implementation of TLTRO program (targeted longer-term refinancing operations) which provides for the provision of liquidity to banks under the condition that this liquidity be transformed into loans to businesses and households as well as the program of buying corporate bonds. At the meeting, the ECB’s projections for growth and inflation will be announced, can not be excluded that on inflation may be revised upwards in view of the recent rise in oil prices and the increase in the price level in the countries of Southern Europe, due to the economic upturn in the EU zone. During the press conference, Mario Draghi should reiterate that monetary policy remains accommodative. It will be interesting to see if Mario Draghi will mention some risks approaching on the horizon, as the referendum in England (June 23) and the legislative elections in Spain (26 June).
US markets closed with modest gains after a pressed start. In fact, the beginning of the session was marked by the OECD warns, the world economy and the disappointing data on China. The OECD warned that the global economy is in a “trap” of low growth, which requires the implementation of measures “coordinated and comprehensive” budgetary, monetary and also at structural level. In China, the PMI indices showed an acceleration failure of the manufacturing sector and a lower dynamism of the services sector, despite the numerous stimulus measures implemented by the Government of Beijing in 2015. However, economic data that were subsequently announced fomented the recovery American indices, which started with the reading of the ISM index, which measures manufacturing activity at national level. In May, the ISM improved slightly to reach 51.3 compared to the 50.8 observed in April. The ISM employment component remained stable, while the price component recorded a slight increase. The Fed’s Beige Book, which makes a detailed description of the US economy, revealed that the 12 districts that make up the Central Bank continue to show modest growth, and is marked in many of them a rise in inflation, as well as some difficulties in finding workers, what the term may imply a rise in wages. However, the construction investment decreased 1.80% in April compared to a revised increase of 1.50% in March. This indicator is particularly volatile and a secluded reading of April variation has limited usefulness. Despite the positive indications given by the ISM and the Beige Book, investors concentrated their purchases in more defensive sectors such as pharmaceuticals and associated with non-cyclical consumption.
Asian indices closed without a common trend. While the Chinese and Korean indexes traded without major fluctuations, Australian and Japanese stocks closed with losses. Losses were more pronounced in Japan due to the strong appreciation of the Yen against the Dollar. As had been reported, Prime Minister Abe officially delayed the rise in VAT from 8% to 10%, which is a fiscal stimulus to the economy. However, to be introduced this measure, the probability of adoption of monetary nature stimulus by the Bank of Japan decreases, which explains the appreciation of the Yen.