Stock indices finished the week in the “green“. The main energy boost they received during the second half of the five-day working. Support benchmarks obtained from positive corporate reporting, and a soft mood, demonstrated by some regulators. In particular, the head of the European Central Bank, Mario Draghi, in a speech very clearly hinted that some additional stimulus measures could be taken already at the December meeting. PBOC lowered the rate on loans by 0.25 percentage points – to 4.35% and the reserve ratio for banks by 50 basis points. Dow Jones rose by 2.47%. NASDAQ rose by 3.89%. Hong Kong HSI ended the week with a total of 1.23%. The leader of the growth was the German DAX 30 (FDAX). The benchmark added 7.16%, rising to the level of 10847.
Gold most of the week remained under pressure. In addition to the technical factors in the form of sales of 1190.0 resistance, the pressure exerted on the metal repositioning in favor of the stock of assets. At the end of the week yellow metal lost 1.07%. Brent crude oil finished the week down 4.78%. Even data on the number of drilling rigs operating by Baker Hughes failed to provide substantial support, as in the United States had dropped by only 1 point compared to the previous week.
Chart of the week:
The economic data of the last week:
- Monday. China Q3 GDP 6.9% vs. 7.0%
- Tuesday. Price Ferrari in the IPO was . It attracted 893 million dollars
- Wednesday. The Bank of Canada kept rates the same at 0.50%
- Thursday. Mario Draghi at a press conference hinted at the likelihood of further easing
- Friday. Eurozone: October index of business activity in the manufacturing sector (PMI Markit), 52,0 against the forecast of 51.8
Forecast for the week on October 26 – October 30
Publication of corporate reporting season continues. This week the interest can cause reports Apple (AAPL) – on October 27 and Exxon Mobil Corp. (XOM) – on October 29. If we take into account that in the last week, the market is optimistic perceive the statistics coming out, one would expect that a similar situation will develop further. However, next week the market has a more powerful catalysts. Of course, we are talking about the publication of the decision on the monetary policy of the US Federal Reserve. The probability of changes in monetary policy at this meeting is practically zero. Moreover, judging by the data of the positions in the futures rate, at the moment the possibility of tightening in December dropped to 30% from 60% a month earlier.
Thus, even a hint of that at the December meeting of the increase may not happen to be capable of causing optimism in the stock markets (in particular, together with statements that on Thursday made the head of the European Central Bank, making it clear that further stimulus is necessary, as well as the decision of the Bank of China cut key interest rates and reserve requirements ratios for banks). In this case, Dow Jones (YM) growth is possible in the area of level 17900 and, further, to 18047. Nasdaq (NQ) is able to rise to the July peak 4685.00. In addition, macroeconomic reports attention should be paid to data on US GDP for the 3rd quarter (October 29), the data on consumer confidence from the University of Michigan on Friday.
Commodity and raw market
Quotes of Brent crude oil to the end of the week came in the area of the lower limit established in recent years range 47.00 – 54.00 dollars per barrel. But to reduce the factors was enough. This increase in commercial stocks in the United States at a record pace since April 2015. Keeping production in the United States at the same level. However, there could still be waiting for the positive dynamics (ie, reduction), taking into account the fact that the number of operating rigs to 62.76% lower than a year earlier. Do not add optimism and lack of agreement on the major oil-producing countries to cut production, as well as evidence of the continuing (albeit less active than expected) economic slowdown in China.
But all this is not enough to quote the “black gold” showed an impressive reduction. Firstly, the European Central Bank clearly signaled that it is ready to continue to stimulate the economy. This means that the sharp decline in demand from a net importer, is not likely to happen. Second, the growth of commercial stocks in the United States can be called the seasonal factor (because October is the peak preventive maintenance refinery). This week the market’s attention will be focused on solving the US Federal Reserve‘s monetary policy. This event may affect the performance of the greenback. If the regulator is soft enough in their statements, the dollar could come under pressure, which will lead to an increase in assets denominated in it. Therefore, Brent crude oil still have a chance to return to the district level of 49.20 and further to 50.80.
Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.