Review of September 7-11: Voltage on the market increases. Forecast for the week September 14 – September 18

By | September 12, 2015

The market situation remains controversial because of the high level of uncertainty about the prospects for monetary policy of the US Federal Reserve. Stock indices for the week showed mixed trends. At the end of optimism came amid reports that the Chinese authorities are considering the deployment of fiscal stimulus programs worth more than 1 trillion yuan ($ 156.7 billion). As a result, Hong Kong HSI ended the week with a total of + 5.14%. Dow Jones rose by 2.14%. NASDAQ added 3.29%. The German DAX 30 (FDAX) was also able to partly recover the loss, an increase of 1.2%.

GBP / USD pair rebounded from the lows, showing an increase of 2% for the week. Support pound received in particular, and by the decision of the Bank of England. The regulator has kept monetary policy unchanged, but noted that short-term inflation outlook has not changed, and some members of the Committee and all reported upward risks to price pressures.

Gold most of the week remained under pressure and completed it with a loss of 1.25%. On Friday, the precious metal said at least 1098.75, but the closure regained some of the losses. On the one hand, the pressure exerted on the metal recovery in equity markets, on the other hand, good statistics from the US, which increases the likelihood of a rate hike. Brent crude oil whole week held within the range of 48.10 – 50.10, ending its virtually unchanged – only 0.5%.

Chart of the week:

gold chart
Gold chart

The economic data of the last week:

  • Monday. Japan Index July Leading 104.9 against 106.5 in June
  • Tuesday . China imposes restrictions on the purchase of foreign currency in order to combat capital flight
  • Wednesday. Canada’s central bank kept the rate at 0.5%
  • Thursday. The Reserve Bank of New Zealand lowered its key rate to 2.75% from 3.0%

Forecast for the week September 14 – September 18

Stock market
The coming week will be quite interesting. September 17 the US Federal Reserve will announce its decision on monetary policy. The market has recently been in confusion, which is not surprising, given the uncertainty of the position of the American regulator. On the one hand, the economy is quite stable, which allows to tighten. However, inflation is still far from the target level, although, as previously noted the Fed Vice Chairman Stanley Fischer, they should not wait until this indicator will return to the target level to start tightening. The fact that monetary policy affects the price pressure from behind. Currently, the Committee is clearly no consensus.
We believe that the rate at this meeting, the Fed still will not increase, which can cause a sigh of relief on the stock market, causing the restoration of Dow Jones (YM) in the area of ​​level 16675 and, further, to 16860, Nasdaq (NQ) to the level of 4370, 20 and in case of a breakthrough to 4416.50. However, if in the comments controller does not appear any clear hints on the timing of the first rate increase, tensions and relatively high market volatility will persist. Even before the publication of a key report of the week we will see data on US retail sales and a report on the consumer price index. However, most likely, those reports no longer will make adjustments to the regulator’s decision.
This week its decision on the monetary policy of the Bank of Japan will announce. Recent data indicate that the economy is not in the best shape of her (of course, for the 2nd quarter GDP was revised upwards to -1.2% from -1.6%, but the decline continues). Taking into account the problems of the entire Asian region, we should not completely exclude the possibility that the regulator will hint at the possibility of launching additional incentives. Against this background, the Nikkei 225 (NKD) may attempt to return to the level 18940.
Sunday will be published statistics on the volume of industrial production in China. If the index will be released below the expected 6.4% in annual terms, it is quite possible, given the drop in the index of business activity in the manufacturing sector (PMI fell to 47.3), fueling fears of further delay of one of the world’s largest economies. Against this background, Hang Seng (HSI) can be reduced to the district level 20300 with the further aim at around 20060.
Commodity and raw market
Quotes of Brent crude oil continues to stay above the level of 48.10, while the attempt to overcome last week was made. This once again confirms that the active area of ​​the mark found quite a strong support. Develop growth quotes prevents the situation in China, where all evidence of the likelihood of further economic slowdown. In addition, the limiting factor is the uncertainty about the prospects for monetary policy in the United States. After all, if the regulator will raise the rate in the short term the dollar may get moderate support, which has a negative impact on the prices of black gold, pushing them to reduce the area of ​​the level of 46.40.
In addition, despite the decline in production in the United States, the volume of commercial stocks in the country is growing, and the world market is still observed excess of supply. However, US producers will be forced to significantly reduce oil production in the near future against the background of a stable low prices for this energy. Moreover, the number of drilling rigs operating in North America for the year has decreased by 50%, and perhaps this trend will continue, as many oil wells drilled in 2014, coming to the end of their life cycle. And in terms of low-price development of new fields will be reduced. Thus, the range of fluctuations of oil in the coming week may be limited to levels of 46.40 – 52.60.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

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