EIA Oil Inventories, US Inflation, Turkish Central Bank Rate Decision
The dollar is still trading significantly weaker than last week as the markets are expecting the Federal Reserve to make an announcement next week to accommodate the negative sentiment from a late-stage economic cycle and possible implications of a trade conflict. US President Trump continued to complain about the “destructive” policies of the central bank due to its high interest rate and strong dollar.
Emerging market currencies like the Mexican peso (MXN) or the South African rand (ZAR) traded stronger against the dollar, while the Turkish lira (TRY) stabilized around the 5.8 in the USD/TRY pair despite concerns what will happen when Turkey takes delivery of the controversial Russian S-400 missile system. As a first step the United States are winding down the sale of the F-35 fighter aircraft to Turkey and cancelling the Training for Turkish pilots.
On Tuesday stock indices in Europe closed mostly on the upside, while US markets and later Asia turned lower. European indices followed this trend by Wednesday morning.
For Wednesday inflation data from Spain is expected. Also some central banker’s speeches like from the European Central bank President Mario Draghi are set for the day. The Turkish central bank will also announce its interest rate decision. Turkish media reports that overall expectations are that the interest bank will remain unchanged, with according to Anadolu Agency only a handful of economists expecting an interest rate cut between 0.5 and 1.5 percent. Then in the North American trading session the focus could be on the consumer price index (CPI) from the US for May, where the annualized CPI is expected to moderately drop from the 2 percent seen last month. Then in the Asian-Pacific trading session on Thursday the Australian unemployment rate and the Japanese Tertiary Index will be published.
The German stock index was one of the best performers in Europe, after trading started with a significant upside on Tuesday, while Monday was a public holiday.
Despite the position of EU Commission to not allow a merger between Thyssenkrupp (+5.03%) and Tata Steel, Thyssenkrupp stocks closed with a significant upside on Monday. The company’s management indicated that this would force them to reduce their workforce by six thousand and also abandon the plans to split its business.
Lanxess (+4.25%) stocks were also one of the best performers in the German index. The company recently announced that since January it managed to buy back more than 4 million of its shares.
Stocks of the struggling Deutsche Bank (+3.81%) moved also higher despite the rating agency giving only the rating of BBB, which is only two levels above the so-called “junk” bond rating. JPMorgan also lowered their price target and is rating the bank as neutral as the stock stays at the lowest price in decades.
German consumer price index (CPI) data is expected for Thursday morning, with most analysts expecting the inflation to stay unchanged at 1.4% on an annual basis.
After an already weak trading day, oil prices dropped further after data from the American Petroleum Institute (API) showed that crude oil stockpiles increased by 4.9 million barrels over the course of last week. While oil prices recovered on Monday, following the previous announcement that the US reached an agreement with Mexico and no tariffs over illegal immigration would be implemented, some investors are still worried how the other trade disputes with countries like China but also the European Union will impact global growth. Oil markets also face the uncertainty how OPEC+ countries will decide in two weeks about the extension of the current production cuts, with Russia’s position on this issue still being subject to speculations.
On Wednesday the Energy Information Administration (EIA) will follow up with its weekly inventory statistics on crude oil, gasoline and distillate inventories.
After some early gains pushed the S&P 500 (US 500) future to a new five weeks high, the stock markets moved lower in the early afternoon. Especially companies in the utilities (US Utilities ETF -0.72%) and industrial (US Industrial ETF -0.91%) closed noticeably lower.
Shares of the meat substitute company Beyond Meat (-25.33%) continue attracting significant attention but also volatility. JPMorgan cut its rating to neutral for the company as they are concerned about the current valuation, while raising the price target to $121, close to the current market price. Shares of the company were sold at the IPO last month only at $25, meaning that the stock trades at more than 400% of its IPO value, making it one of the most successful IPOs this year. By contrast the ride-hailing app company Uber (-0.18%) is still trading below its IPO price of $45.
Food delivery service company GrubHub (+8.50%) was one of the beneficiaries of Amazon’s (+0.20%) announcement that it would shut down its restaurant delivery service. However, the end of the Amazon Restaurant program does not mean the end of the engagement of this sector by the e-commerce giant, as analysts are pointing out that Amazon recently bough into the UK company Deliveroo, indicating its interest in this sector.
For Wednesday monthly data on consumer price inflation is expected to be released. Also the U.S. Bureau of Labour and Statistics is set to publish data on real earnings, which in the previous month declined by 0.4%.
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