Investor positive reaction on humanitarian aid to Ukraine | IFCM
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Investor positive reaction on humanitarian aid to Ukraine - 12.8.2014

World stock markets went on rising on Monday, as there was no significant macroeconomic data. Investors had a positive reaction on the news of sending humanitarian aid to the military action area in the south-east of Ukraine, provided by the U.S., the EU and Russia under the auspices of the International Committee of the Red Cross (ICRC). This might cut down the geopolitical risks in Europe.

The news about the subsidiaries of the largest American pipeline company Kinder Morgan Inc. switching to a single share boosted its stocks 9% and increased the S&P 500 index. Sysco submitted a good earnings report for the second quarter, and its stocks rose 3.2%. The volume of trading on the American stock exchanges continued falling. Yesterday it was 4.7 billion stocks which is 23% less than the 5-day average. No significant US macroeconomic data is expected today. Note that the P/E ratio of the S&P 500 dropped slightly from its June four-year high of 18.3. Now the P/E ratio is approximately equal to 17.6.

European stock indices have indicated a modest downward correction after the two days of growing. Investors expect the negative data on German economic indicators downfall, calculated by The Centre for European Economic Research (ZEW). The data is to be released at 9-00 СЕТ. Household Chemicals manufacturer Henkel AG announced its possible profits reduction in the second half of the year. For that reason, its stocks slipped 3%.

Nikkei is in the sideways trend today. Weak data on the industrial output has come out this morning. Now investors expect the GDP data for the second quarter and the July results of the BOJ meeting. This information will appear tonight at 23-50 CET. Due to the sales tax increase in April, the quarterly GDP is expected to shrink 7.1%. We believe that such economic downturn has already been taken into account by the stock market. Theoretically, there may be a bigger decline on the basis of bad data on Japanese exports and industrial production. A further yen weakening is not excluded.

Negative data on the banking sector in July has come out this morning in China. The volume of yuan loans in July fell 28%. This may affect the commodity futures quotes.



Soybean prices slipped slightly despite the decreased weekly US crop rating of the "good and excellent" category for this season by 1% to 70%. This rating is assigned by the USDA. Last season the rating of soybean crops was significantly lower and made up 66%. Let us remind you that the USDA monthly report release is expected today, which may affect the agricultural commodity futures quotes. In general, market participants fear the upward revision of the wheat and soybean crop forecasts in the United States.



A slight increase in coffee prices was observed yesterday. International Coffee Organization claimed that its world exports decreased 3.5% in the first nine months of 2013/2014, compared with the previous season and reached 81.8 million bags (60 kg each one). The global exports decline in June was not so significant and amounted to 0.2%. "Robusta" coffee production for this season in Indonesia slumped 47% and "Arabica" in Brazil - 9.3%.

Cocoa prices have reached a three-year high. Its exports from Ivory Coast since last October to July (2013/2014 season) added 7% and reached 1.4 million tons. According to market participants, it is an evidence of the demand increase, and can cause a shortage of cocoa at the end of the season. The spread of Ebola fever in Ivory Coast can be considered as an additional factor in cocoa price growth.



Oil prices dropped slightly after the decline in forecast of its world demand growth by 180,000 barrels per day (bpd) this year and 90,000 bpd in 2015, according to IEA agency. Now, according to IEA, the global oil demand for this year will increase by 1 million bpd and reach 92.7 million bpd. It is expected to grow by 1.3 million bpd (up to 94 million bpd) in 2015. OPEC oil extraction in July peaked to a 5-month high, and amounted to 30.44 million bpd. It is difficult to say whether a drop in oil prices would be a long-term one. As expected, its US reserves will fall by the week for the seventh time in a row - to 1.75 million barrels, and make up 363.9 million barrels. The official data, as usual, will be released tomorrow at 14-30 CET.

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