US data contributes to prices rise | IFCM Italy
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US data contributes to prices rise - 6.10.2014

World stock markets rose on Friday, due to the released positive data on the US labor market. Investors deem that this may contribute to the global economy development.

The US Non-Farm Payrolls in September outperformed considerably the expectations and amounted to 248 thousand. Unemployment rate has fallen to its lowest level since July 2008 and was 5.9%. Due to this data, the Fed rate hike in the middle of the next year is highly probable. The negative trend of the American labor market is also should be noted. The ratio of the working-age population and job seekers dropped to its lowest level since 1978 and amounted to 62.7%. In our opinion, this may be the evidence that many Americans could have lost the status of officially unemployed without even finding a job. Perhaps, this is the reason why stock market participants were careful. The trading volume on the US exchanges was 6% lower than the average for the previous five days of downtrend in prices. Anyhow, the result of the data released on Friday was not only the increased stock price but also the rate hike of the American currency. The US dollar index ticked up for twelve weeks in a row, for the first time in forty years. Since the beginning of the year it has already risen by 8%, which is the largest increase in nine years. There will be no significant US macroeconomic data for today. Futures on the US stock indices are traded considerably upwards. Note that the quarterly reports of nine companies listed in S&P 500 are to be released this week. Now market participants expect the growth in Q3 total profits of all 500 companies by 4.9%. The reports will affect significantly the dynamics of the stock indices.



Except for the US statistics, the additional positive factor for European exchanges on Friday was the fallen world oil price. As a result, the stocks of such airlines as Air France-KLM, British Airways and the aircraft manufacturer Airbus upped in price. Amid the US dollar consolidation, the euro has already fallen 11% since the beginning of this May. That can be considered good news for the stock market. The single currency weakening can increase about 5% the income of European corporations-exporters. This morning European markets have continued to rise, despite the weak data from Germany. Factory Orders in August tumbled 5.7%, which was the most significant decline since 2009. No more important economic data in the EU is expected today.

On Friday Nikkei climbed in prices along with the other world stock indices. Fujifilm Holdings stocks jumped 5% as investors hope that its antiviral drug is also capable of treating Ebola. Tonight we expect the BOJ announcement regarding the monetary policy.

As we have assumed in the previous overviews, grain futures started to rise in price. News from Iran and Argentina appeared to be the extra factors in favor of the wheat prices growth. Iran is going to purchase more than 2 million of Kazakh wheat in the next 2-3 years. Currently it purchases about 340 thousand tons per year from Kazakhstan. Rainy weather in Argentina increases the risk of flooding in the southern and western part of the so-called “farm belt” of the country: the regions specialized in the cultivation of wheat. According to Buenos Aires Grains Exchange, this year crop should reach 4.1 million tons.



Soybean prices rose after the USDA had announced that only 10% of the harvest was gathered by September 28, whereas 17% in average was gathered in the last 5 years. This was explained by the rainy weather in the US Midwest. According to forecasts of MDA Weather Services, the bad weather will also spread to the south-eastern part of the region. Note that for the same reason, there was a remarkable growth in corn prices.



The gold price hit the yearly low amid the US dollar rate strong consolidation and positive statistics that demonstrates the US economy recovery. Earlier we have repeatedly drawn your attention to the fact that market participants consider precious metals to be defensive assets. They are becoming more expensive due to world instability. We would like to pay attention to the fallen world oil prices, and as we have also noticed, it is quite coherent with the anti-Russian sanctions.

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