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Global stock markets had multidirectional price movement - 3.7.2014

Global stock markets had multidirectional price movement on Wednesday. Investors expect the U.S. official employment data to be released today at 12.30 CET. Nobody wants to risk up to this point.

The S&P500 fluctuation intraday range was the lowest since 1993 yesterday and was only 0.2%. The trading volume on the U.S. exchanges was about a quarter below the monthly average for the month and lower by 14% within three months. It made 4.79 billion shares. The speech by the Fed Chairman Janet Yellen did not contain any significant information for the markets. She noted that the interest rates should not be the main instrument for financial stability. Yesterday's report on the U.S. labor market from ADP has been very positive. Number of new jobs in June, far exceeded the projections (200 thousand people) and found the maximum per half year (281 thousand). Today we expect the official announcement of the same Nonfarm Payrolls indicator. The outlook is positive. The unemployment data for June and the trade balance for May will also come out. Both indicators are expected to be positive. At 13-45 we will see the services PMI from ISM. The forecast is neutral.

European shares moved under the influence of corporate reports yesterday. The economic data was not particularly important for the market. Investors are awaiting the ECB meeting results, after it takes place today at 11.45 CET. The discount rate is likely to continue at the current level of 0.15%. At 9-00 CET, we will see the data on retail sales for May in the Eurozone. The outlook is negative, but this is unlikely to have a major impact on the markets. Since the ECB press conference is more important. In its course, there may be details of the next program of bank lending at 400 billion Euros, as well as how long the TLTRO policy may last. (Earlier, the head of the ECB, Mario Draghi said that his agency plans to consider the possibility of launching the Euro currency issue similar to the "QE" by the U.S. Fed.



The Nikkei fell today. Probably, market participants decided to take some profits anyway before the U.S. Nonfarm Payrolls. The economic data from Japan in general coincided with forecasts and was not particularly significant yesterday.

The Oil continued to decline. Investors ignored the drop in the U.S. inventories last week by 3.2 million barrels and gasoline stocks by 1.2 million barrels. It is much worse than expected. Especially before the weekend because of the Independence Day. Investors took the opening of two Oil terminals in Libya and a possible increase in its exports by 500 thousand barrels per day highly positive. The country produces 320 thousand barrels per day now.



The Gold prices stopped growing. The Reserve Bank of India (RBI) is planning to exchange a portion of its gold reserves to gold bars that meet international standards. The target is to improve the manageability of international reserves. That was the proposal from the RBI to Indian commercial banks. Gold reserves in India are in the 11th place in the world and shows 557 tons. Mumbai Jewellers Association believes that a part of the non-standard gold goes to the domestic market. This will reduce the premium price of the Gold in London to $5.10 from the current $25 per ounce, and is likely to reduce the demand for the metal in India.



The cotton price continues to come cheaper. India raised its forecast for its exports this season by 27% to 11.4 million bales. The cotton crop forecast has also been raised in India from 37.5 million bales to 39 million last year, the country produced 36.5 million bales. Note that due to active use of genetically modified seeds, the yield increased to 565 kg per hectare. It is heavily dependent on weather conditions and can significantly drop in case of drought. China launched public stocks of cotton realization at the end of April 2014, which greatly reduced the global demand. The International Cotton Advisory Committee predicts a drop in world cotton production in the season by 1.7% and increase in the demand of 3.4%. The difference coverage is assumed due to stocks of past seasons.

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