Stock indices finished the week in the “red“. The main factor of pressure on the benchmarks were Brexit concerns. But apart from this disappointment the US indices have added comments and the head of the US Federal Reserve after a meeting of the Monetary Policy. Overall, Yellen expressed uncertainty about the stability of the economic recovery. As a result, Dow Jones finished the week down 1.61%. NASDAQ lost 2.29%. The German DAX 30 fell 1.05%. Asian indices for the week were in the largest decline. Hong Kong HSI fell 3.51%. Japanese Nikkei (NKD) closed with a result of -4.52%, largely due to inactivity regulator at the last meeting, which made it clear that is not to interfere, despite the significantly strengthened in recent years the yen to keep the room for maneuver in event of the UK from the EU.
On the currency market the USD / JPY has lost 2.6% on the theme of flight from risky assets. Quotes reached a 22-month low of 103.54. Quotes GBP / USD fell to the lowest since April 2016, but later the pound managed to recover and as a result even rose by 0.71% on the week.
Brent crude oil declined to a level of 46.94 dollars per barrel, but the closure of the week regained some ground. At the end of five days the energy carrier is losing 2.08%. Rollback is not prevented even data from Baker Hughes, reflecting the continued growth in the number of drilling rigs operating in the US (+ 9 units). Precious metals continue to rise due to lower interest in risky assets. Gold (XAU / USD) increased by 1.92%. Silver (XAG / USD) added 0.96%.
Chart of the week:
The economic data of the last week:
- Monday. China: May industrial production of 6.0% vs. 5.9% expected
- Tuesday. US May retail sales + 0.5% vs. + 0.3%
- Wednesday. Janet Yellen on the FOMC meeting sounded neutral, refraining from hints at further rate hike
- Thursday. The Bank of England unanimously kept monetary policy unchanged
- Friday. Canada: May consumer price index of 0.4, 1.5% vs. 0.5%, 1.6%
Forecast for the week on June 20 – June 24
In connection with the upcoming referendum in the UK, the volatility in the market may be increased, and therefore the time-changing trading conditions. Although after supporters of both positions agitation stopped, the situation may be somewhat stabilized until the arrival of voting. But, if we abstract from this event, there are a lot of interesting things. In particular, the US was to publish a rather large block of statistics. This data on business activity in the service sector and the industrial sector from at Markit and report on sales of existing homes and new home sales, and data on orders for durable goods.
Once Janet Yellen at a press conference after the publication of the rates decision, made it clear that the regulator is not sure of the stability of the rate of US economic growth, with special care the market will evaluate all incoming information to try to estimate how soon the Fed may go on rate increase. Short term, weak statistics could put pressure on US stock indexes. However, if the British vote for the country to remain in the EU, the stock market can breathe a sigh of relief, and it is possible that the benchmarks will show growth. Dow Jones (YM) may return to the level of 17900. NASDAQ (NQ) is able to get up to the area level of 4470.0.
Commodity and raw market
Oil a large part of last week remained under pressure, which is not surprising against the background of the impressive fears caused by the output probability of the UK from the EU. In fact, the results of voting in the country may also influence the energy source in the coming week. But, most of all, what so afraid of the markets does not happen and the country will remain in the EU. Consequently, Brent can get tangible support. Especially because a large number of reasons for the drop in prices below the level of 47 dollars per barrel, in general, no. Of course, the market is still afraid of returning shale projects.
But for this to happen, first of all, take time, and secondly, is, at best, will reopen old as for new investment projects in this sector is still too high degree of uncertainty. In the meantime, the volume of production in the US continue to decline (-29,000 barrels). In addition to the traditionally British referendum will follow the data on commercial stocks in the United States and data on the number of operating rigs. But even the positive dynamics of indicators is unlikely to be sufficient to ensure that Brent has updated the recent highs. Most likely, the black gold will remain in the range of 47.00 – 52.83.
Results of the referendum in the UK may be affected, first and foremost, to the European currency. Just look at the dynamics of the euro and the pound, which was the last working day of last week showed an increase only on the cessation of agitation against the supporters of the country to remain in the EU and their opponents. Therefore, if all the same it is decided to retain membership in the European Union, and the pound, and the pan-European currency can demonstrate growth against the dollar. The fact that the consequences for the UK economy in the case of the EU will be quite heavy, and given the close trade relations with the euro area, the latter also have to feel the all the “charms” of such a decision. Moreover, it is possible that such a development will push the eurozone into recession. Thus, provided that the majority vote in the EU “for” GBP / USD pair could easily return to the level of 1.4500 and further to 1.4730. In EUR / USD will also be glad to growth with the primary purpose at the level of 1.1400.
Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.