On Friday the U.S. stocks closed considerably lower, most of all due to the negative financial statements from US companies. Cisco has revised down the outlook for its financial performance with the reduced sales outside the U.S. which pushed its stocks 5.8% lower. The retailers Nordstrom and Macy's published the negative forecasts as well with their stocks down by 15% on this news. The quarterly sales of wristwatch producer Fossil reduced by 16% which made its shares plummet 36.5% in a single day. The U.S. macroeconomic data on Friday were quite weak too. The October retail sales increased 0.1% less than previously expected. For this reason, Barclays revised down the outlook for the U.S. 4Q GDP to 2.4% from 2.5%. The producer price index for October fell 0.4%. In September it also fell 0.5%. the market participants believe this will reduce the corporate earnings in Q4. All the negative statistics influenced the futures on the US interest rate. The probability of its hike on December 16 fell to 66% from 70% last Thursday. The trade volume on the US exchanges was 7.7bn shares which is 8.5% lower the 20 trading days average. Today in the USA no important macroeconomic data is expected. We believe the U.S. currency and stocks fluctuations and may become less predictable as the Fed rate hike is planned amid the falling corporate earnings. 90% of the S&P 500 components have released their earnings for the 3rd quarter so far. Their gross revenue has contracted by 0.9%. If the remaining statements do not change the current situation, this will be the first quarter with contracted earnings since 3rd quarter of 2009. Moreover, in the 4th quarter the investors expect the corporate earnings of S&P500 components to contract by 2.4%. The situation being as it is, the rate hike may be an additional negative factor because of the increased credit burden. The US dollar index live data indicate the index has slightly increased. The impovement of the November consumer confidence index of Michigan University contributed to the above.
Today the European stock indices and euro opened with a significant gap down because of the terrorist attacks in Paris. Later they pared some losses as markets compare the attacks in France to the 9/11 events in US New York expecting no repetition. Nevertheless, the situation made the U.S. dollar and the Swiss franc stronger. Investors regard them as safe haven currencies. Investors believe the terrorist attacks may harm the French tourism a lot. The hotels chain Accor saw its shares fall 6.3%, the airline Air France KLM stocks fell 5%, Eurotunnel fell 4,5% and the airport operator ADP fell 3,8%. Today at 11:00 СЕТ the inflation for October will come out in Eurozone. We believe they are negative for euro but positive for the European stocks. At 11:15 CET the ECB President Mario Draghi will speak.
Like European indices, Nikkei opened with a large gap down but slightly rebounded later. The Japan’s GDP contracted by 0.8% in the 3rd quarter. Investors see there a sign of the economy falling back into recession. This pushed the yen lower against the US dollar which, in its turn, boosted the stock market. The weak yen makes the Japanese goods more competitive.
The increased global risks due to the terrorist attacks and the following bombing of the terrorists in Syria by the French Air Forces sent the gold futures up amid the significantly increased trade volumes at COMEX.
The copper extended losses today. The Chile’s Codelco, the copper producer, has lowered the futures premium at the London Metal Exchange for the physical delivery to China in 2016 by 26% compared to 2015 which is much lower than expected. Markets regarded the reduced premium as a sign of lowered demand for this metal from China. Note, that the copper for physical delivery is slightly more expensive than its futures contracts.