World stock market rose on Thursday after falling - 17.10.2014

The upward retracement on the world stock market was outlined on Thursday, after a sharp fall of the previous few weeks. This was caused by the steep decline in the US Initial Claims to the lowest level in 14 years and the statement, made by the President of the Federal Reserve Bank of St. Louis James Bullard, who suggested the Fed was likely to proceed with the economy stimulation owing to the money issuing, as long as the inflation rate remained low.

Lets us remind you that the monthly purchase amount of the US government bonds by the Fed plunged to $15 billion, from $85 billion at the end of last year. Earlier, it was expected that this purchase program will be fully completed at the next Fed meeting on October 29. An additional positive factor for the US stocks on Thursday was the growth of 1% in industrial output in September. This is the biggest advance since November 2012. However, yesterday the Dow Jones closed down for the sixth consecutive time, for the first time since last August. It has slipped 2.8% since the beginning of 2014. The trading volume was high on Thursday and amounted to 9.9 billion stocks, which is 18% above the monthly average. After the trade closing a weak Google earnings report was released and the company’s shares fell 2.8%. Despite this fact, futures on American stock indices are currently traded considerably upwards. In the USA the Fed Chair Janet Yellen is giving her speech at 12-30 СЕТ today, and data on real estate market in September is to be published. All the estimates can be considered optimistic. At 13-55 СЕТ the consumer confidence index by the University of Michigan will be announced. The outlook is neutral.

European stocks have risen today after Stoxx Europe 600 Index reached the 10-month low yesterday. Investors reacted positively to the possible continuation of the Fed money issuing. Car sales in Europe upped 6.1% in September for the thirteenth consecutive month. As a result, Renault stocks climbed 3.1%, Peugeot Citroen – 4.8% and Daimler – 1.8%. Note that Rolls-Royce stocks tumbled 7.8%. The company declared the demand fall as the anti-Russian sanctions were imposed. We do not expect any important macroeconomic data today in the euro zone.

Today Nikkei has upped considerably less than other world stock indices. It slipped 13% from the six-year high reached in late September. According to the weekly report of the Japanese Ministry of Finance, the weekly stock sell-off of local companies by foreigners was the highest in the last two months.

As anticipated, grain futures continued to rise in prices. The weekly boost in corn prices proved to be the highest since last May, and soybean prices – the highest in 14 months. Wheat prices hit the 5-week high. The main reason for this trend was the US rainy weather that prevents the harvest from gathering. According to the USDA, 24% of the corn crop was gathered in the country on October 12. Meanwhile, the average crop taken by the same date was 43% for the last five years. Note that a few meteorological agencies forecast a drier weather next week. In this case, the grain futures price increase can be slowed down. The last US corn crop forecast for this year by the USDA amounts to 14.475 billion bushels, and soybean crop – 3.927 billion bushels. Its revision can influence the prices.

Oil prices are rising for the second consecutive day after a strong fall. The day before several major investment banks, including Goldman Sachs, Bank of America Corp, BNP Paribas and Commerzbank AG, suggested that the global market has no excessive surplus of oil, and the WTI price is unlikely to dip below $80 per barrel. There was also expressed the possibility of OPEC production cut on November, 27. As the US oil production recorded the highest since 1985 and reached 8.95 million barrels per day. Previously, we expected a decline in oil prices, noting that it is coherent with the anti-Russian sanctions imposed. The oil downtrend is unlikely to change the direction that quickly. Iraq, fully controlled by the US troops, plans to increase oil exports in November by 600 thousand barrels per day, to 3 million. The OPEC production is at the highest level since August 2013: it amounts to 30.47 million barrels per day. Last time the cartel reduced the production only during the global economic crisis in December 2008.