Downfall of indices was caused by economic as well as political events | IFCM UK
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Downfall of indices was caused by economic as well as political events - 18.7.2014

On Thursday, the global stock market showed a drop in prices. This was caused by economic and political events. The U.S. real estate market data turned out to be very weak.



The number of new buildings in June decreased by 9.3% down to the 9-month low at 893 000. The difference between the forecast and reality was 1020K and it turned out to be the maximum since January 2007. The building permits fell by 4.2%. Besides this negative, a part of the U.S. statistics was positive. The U.S. labor market report was better than expected this week. Jobless Claims fell to 302 000. At the same time, the this indicator volatility dropped to its 7-year low within 4 weeks. This confirms the unemployment reduction stability. The PMI manufacturing index of Philadelphia (Philly) rose to the high of 3.5 years. Theoretically, there could not be a sharp reduction of stock indices like this, if the passenger plane crash over Ukraine was not occurred. Investors took it quite negatively, as this event increases the risk of making the situation between Russia and Western countries red hot. The Ukrainian Government, supported by the U.S. and EU, is fighting against Russian-speaking citizens in the country, considering them separatists. Trading volume on the U.S. exchanges was 21% higher than the monthly average yesterday. However, there was the good reporting from Google released after the trading session was closed. Now the U.S. futures indexes are traded positively. Today, the consumer confidence index from the University of Michigan for July and the leading indicator for June are striking out in the United States in 14-00 CET. The forecasts are positive. We believe that it would be worth to pay attention to the first component. As the possible rise in consumer confidence can neutralize yesterday’s negative real estate market data. Of course, if it grows in line with the expectations of investors up to 85-87 points. Before the trading session is open, Honeywell and Bank of New York will present their reports.

European stocks fell along with the global stocks yesterday. The EU inflation in June remained at the low level of May and that raises the deflation risk being a negative for the stock market. The plane crash in Ukraine has had a significant negative impact on investor's sentiment, as the country borders with the EU. There is no significant macroeconomic information in the EU for today.

The Japanese Nikkei Index keeps fluctuating actively with in its neutral due to external factors.



The Malaysian airplane crash in Ukraine triggered the strong Wheat price growth. As it increases the political risks in the food market. Total exports of Russia and Ukraine is estimated at 28.5 million tons within the current year. That is roughly a fifth of the worldwide Wheat trading volume that could reach 151.7 million tons. Besides the grains, the Oil and Gold pricesalso rose because the crash.



The Gold price slightly fell today after yesterday's growth. The SPDR Gold Trust fund reported the reduction of its reserves by 2.7 tons down to 803.3 tons on Thursday.

The Copper price kept falling due to the weak Chinese real estate market data. The home prices in June were falling for the second month in a row. The metal is widely used in construction. The Polish company, KGHM announced the launching the copper production in the Sierra Gorda field in Chile. It is planned to produce 110 thousand tons this year. Production is planned to increase to 217 tons by 2018. In Indonesia, The conflict between the U.S. company, Newmont Mining and Indonesian government goes on. The authorities require to pay higher duties and start exporting copper. Otherwise the license for production and mining of this metal is not excluded to be rescinded. In our point of view, the resumption of copper supplies from Indonesia to the world market could make the prices fall down.

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