Review of 18-22 January, when the panic subsides. Forecast for the week 25-29 January

By | January 24, 2016

On the stock markets ended the week showed mixed trends. After the collapse of the lows in August 2015 in the first half, to the closing benchmarks we were not only able to win back losses, but also to strengthen against the backdrop of the recovery in oil prices and a soft rhetoric head of the European Central Bank at a press conference following the publication of decisions on monetary policy. US Dow Jones rose by 0.46%. NASDAQ added 2.47%. The German DAX 30 (FDAX), rose by 3.43% due to expectations of further stimulus from the European regulator. Hong Kong HSI rebounded from a minimum of 3.5 years, and closed the week higher by 0.98%.

The Canadian dollar was a powerful stimulus to growth against the decision of the Bank of Canada to maintain the level of rates unchanged (0.5%) and the recovery in oil prices. Pair USD / CAD fell to the level of 1.4153, shedding 2.89%. The EUR / USD background Mario Draghi hints at possible expansion of the QE program in March, the European currency was under pressure. For a week the pair fell to 1.09%.

Raw materials and precious metals showed positive dynamics. Brent crude oil ended the week above 32.00, noting a maximum of 32.27 dollars per barrel. The growth was 10.1%. Gold (XAU / USD) and silver (XAG / USD) round out the week with a symbolic increase by 0.83% and 0.7%, respectively. But after the stabilization of copper on Chinese markets and measures against the People’s Bank of China to inject 400 billion yuan into the financial system of the country, was able to gain a foothold in 3.01%.

Chart of the week:

brent crude oil

Brent crude oil

The economic data of the last week:

  • Monday. US and EU sanctions against Iran have removed
  • Tuesday. China: Q4 GDP + 1.6%, + 6.8% against the forecast + 1.7%, + 6.8%
  • Wednesday. The Bank of Canada kept interest rates unchanged at 0.5%
  • Thursday. The European Central Bank, Mario Draghi gave a signal to the market about the possibility of expanding the QE program in March
  • Friday. Germany in January, the index of business activity in the industrial sector (Markit) 52,1 – below the forecast of 53.0

Forecast for the week 25-29 January

Stock market

This week the stock markets can retain optimistic, but under certain conditions. The first – the lack of external shocks in the form of a new wave fall in the Chinese stock market. Second – the US Federal Reserve hints that the pause in the rate hike could be delayed, which would be a continuation of promise, who on Thursday made Mario Draghi, making it clear that the expansion of the quantitative easing program may occur in March. This was one of the key factors that enabled benchmarks recover. At the same time the German DAX 30 (FDAX) in connection with this gets a good potential for growth in the medium term. As one of the immediate objectives can be considered the level of 10055. But it is entirely ruled out short-term drawdowns down is not necessary.

On Wednesday, January 27, the Fed will announce a decision on monetary policy. At this stage, very few people waiting for the regulator decides to raise rates. According to the positions of futures rate in January, the probability of such an outcome is estimated at only 8.4%. Particular attention will attract comments from the Federal Reserve. Soft rhetoric containing allusions to the fact that they are not going to force the issue and will continue to raise rates when it will be created for the appropriate economic conditions could push up US indices. Against this background, Dow Jones (YM) may try to recover to the level of 16450. Nasdaq (NQ) in this case, sets his sights on a return to the level of 4370.20 after breaking 4245.00. Furthermore, additional factors can act in support of the weaker than expected data on orders for durable goods in the US (28 January), and a report on the pace of US economic growth in the 4th quarter of 2015 (January 29 at 13:30 GMT). Although the first reaction to the negative statistics may be a short-term decline that may allow to enter into positions at more attractive levels.

Commodity and raw market

Oil prices seem to “find” a temporary bottom. In the last two working days of last week, quotes Brent crude oil showed growth against the background of the stabilization of the situation in China, comments the head of the largest oil company of Saudi Arabia that the drop in oil prices below $ 30 – “irrational” phenomenon, as well as a sharp cold snap on the east coast the United States and some parts of Europe. Technically, closing the week above $ 32 per barrel for Brent opens the way up to the mark of 34.00 and further to 36.00. If we take into account the state of the demand and supply of oil on the world market, of course, reasons for the strengthening of the oil yet.

However, prices below $ 30 a barrel are questioning not only the profitability of shale projects, but also in the production of traditional methods of hard deposits. In addition, the low prices for oil will sooner or later provoke a decline in investment in the sector. All this may lead to a decrease in supply and equalize the imbalance. In particular, US working rig number decreased by nearly 70% compared with the maximum marked by 2014. The life cycle of shale projects is short, which means that in the United States for the next six months may begin a sharp reduction in production (although in the last 6 weeks, according to the EIA, it is growing). So next week, even the absence of bad news can be good news and push quotes Brent to around 34 – 36 dollars per barrel.

Currency market

On Friday it will be published fairly large block of macroeconomic statistics from Japan. This data on the consumer price index, and reports on the labor market and industrial production. Weak reports figures give reason to believe that the Bank of Japan will soon be waiting for action towards greater incentives, as has recently been actively rumored. And if it does not happen at the meeting on January 29 then it will be possible in March. But if the regulator will present such a surprise, USD / JPY pair may return to the area of ​​the level 120.60.

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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