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US dollar weakens as stocks end flat

US stocks ended flat on Tuesday. Expectations that Federal Reserve will raise interest rates sooner rather than later after recent positive economic reports weighed on market sentiment. The National Federation of Independent Businesses report on Tuesday indicated the small business index, which measures optimism among smaller companies, rose to 98.3 in May, the highest level in six months, as six of 10 components improved. Job openings rose to 5.38 million in April compared with 5.11 million in March. US wholesale inventories outperformed expectations of 0.2% gain and rose 0.4% in April. Better than expected economic reports added to Friday’s strong jobs report suggesting that US economy’s slowdown in the first quarter was due to temporary effects, leading to sell off in the treasury market and rising yields. Dollar extended losses against main rivals on Tuesday as investors worried US officials and policymakers are getting concerned about the negative impact of growing strength of the dollar on US economy. The ICE US dollar index fell 0.1% to 95.174. Today at 12:00 CET Mortgage Applications will be released in US. At 19:30 CET May Budget Statement will be published in US. The tentative outlook is negative. At 15:30 CET Crude Oil Inventories will be released in USA.

European stocks ended lower for the sixth straight session as uncertainty over Greece’s economic future undermined investor confidence. Government bond yields inched higher, pushed by improved inflation outlook in euro-zone. The Stoxx Europe 600 lost 0.4%, dragged down by 0.6% fall in Germany’s DAX. Greece submitted a new reform proposal to the European Commission. The plan was not considered adequate as it falls short of the budget targets that Prime Minister Tsipras agreed on in a meeting with European Commission President Jean-Claude Juncker last Monday, a European Union official said according to Bloomberg. Greece has until June 30 to reach an agreement with its creditors to have the bailout aid extended. Standard & Poor’s Ratings Services cut its credit ratings on Deutsche Bank AG, Royal Bank of Scotland NV and Commerzbank AG to triple-B-plus, three notches above junk grade. No important economic data are expected today in euro-zone. Today at 21:00 CET Bank of England Governor Carney will speak at the annual Mansion House dinner in London.

Nikkei fell 0.3 % to a three-week low today as the yen surged after Bank of Japan Governor Haruhiko Kuroda said its effective exchange rate is unlikely to weaken further.

Australia's central bank said today it was "open to the possibility" of more interest rate cuts if needed.

Oil prices surged on Tuesday as US Energy Information Administration monthly report indicated US output is expected to decline from June through early 2016. EIA forecast 2016 output to average 9.27 million barrels-a-day, below its 9.43 million forecast for 2015. Output averaged 9.6 million barrels-a-day in May, the highest monthly level since 1972. Oversupply in oil market will continue though unless oil demand increases due to higher global economic growth as lower US output is expected to be offset by increasing output from other major oil producers. Iran is another major producer ready to increase its exports rapidly as sanctions are lifted after a final agreement on nuclear talks.

Gold prices closed higher on Tuesday for a second day as falling equity markets boosted demand for safe haven assets.



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