The US dollar index soared on Friday meanwhile US stocks dropped. Such movements were explained by higher possibility of the Fed rate hike following the macroeconomic data releases. Core CPI in April posted the highest level since January 2013 (0.3%). The Fed Chair Janet Yellen announced that the Fed is ready to raise rates this year. Let us remind you that its level, which is close to zero, has been retained since 2008. Moreover, the Fed printed $3.5 trillion for the bond-buying program in order to support the US economy. Most of the US financial markets are closed today in observance of Memorial Day.
European markets showed little change on Friday ahead of the long weekend in a number of countries, including Germany, Switzerland and the UK. The Stoxx Europe 600 Index is sliding today, given the low activity of market participants. The trade turnover is 75% below the monthly average. The Spanish IBEX 35 Index fell 1% after the left-wing opposition won several municipal elections. The Italian FTSE MIB Index sagged 1.5% because of a possible merger of Fiat Chrysler and General Motors. The euro continues to fall as the day of Greek payment to the IMF is approaching. The authorities insist on financial bailout from the European Union in the amount of €7.2 billion. The Greek ATG index is down 2.5%. Today we don’t expect any significant data to be published.
Nikkei has risen today for the seventh straight day and hit the 15-year high as positive macroeconomic and corporate data was released. Exports in April upped 8%, while imports dropped 4.2%. It resulted in a marked reduction in the Trade Deficit compared with the forecast. In particular, overseas sales of Toyota Motor Corp increased, which bolstered the company’s stocks. Tokyo Electric Power won a tender to construct a gas-burning power plant in Qatar and the company’s stocks surged 6.7%. Market participants attribute the Japanese economic success to the policy practiced by the Prime Minister, Shinzo Abe. The policy implies monetary stimulating and the yen weakening. Yesterday the Japanese currency depreciated, or rose on the chart, up to two-month high, close to eight-year high and the upper boundary of the six-month sideways trend.
Coffee prices have been dipping the fourth day in a row. Its Brazilian reserves were reduced to five-year low. According to Conab estimates, the coffee reserves make up 5-8 million of 60kg bags. This is considerably lower than the last year’s level of 8-17 million. The domestic consumption of coffee in Brazil is estimated at 21 million bags and exports values at 44-46 million. The current season crop is projected at about 50 million bags. Some market players are concerned whether actual reserves would be sufficient for domestic consumption, or for exports. Recall that the Brazilian coffee exported last season totaled 36.8 million bags.
The British pound weakening underpinned cocoa prices and drove them up to 8-month high because of conducting arbitrage operations between stock exchanges in New York and London.