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Markets advance as Central Banks consider cutting rates

US stocks were on the rise on Thursday on expectations the Bank of England is to add some stimulus to the economy and ease its monetary policy while the US consumer staples were driving the markets further up. Moreover, the economic data were positive with factory activity rising in June to almost 1-1/2-year high. S&P 500 index advanced 1.36% to 2,098.86 with all ten its major sectors closing in the black and consumer staples leading the growth (2.2%). Hershey stocks sky-rocketed 16.8% on the news of its rejected takeover. Dow Jones industrial average added 1.33% to 17,929.99, Nasdaq composite advanced 1.33% to 4,842.67. US Treasury yields slumped to 4-year lows not far from all-time lows on the talks Central Banks may go further with easing monetary policies. Today at 15:45 CEST the Markit manufacturing PMI for June will come out, the tentative outlook is neutral. It will be followed by the same index from ISM at 16:00 CEST. May construction spending and June ISM prices paid will come out at the same time. Today at 19:00 CEST the Baker Hughes US oil rig count will come out.

European stocks retreated in early trading on Thursday on weak performance of the banking sector but managed to rebound and closed higher. Only healthcare stocks managed to show steady growth yesterday. British drug companies AstraZeneca and GlaxoSmithKline added 10.5% and 7.5% in the past three trading days. The pharmas are advancing as their revenues mostly come from abroad so they benefit from weaker pound. STOXX EUROPE 600 and FTSEurofirst indices both lost 0.6% yesterday in early trading and around 10% since the start of 2016. FTSE added 0.14%, DAX30 fell 0.19% and CAC40 rose 0.30%. The British FTSE has completely erased the Brexit sell-off while is pound was traded at $1.33 on Thursday. At the same time, the Band of England Governor Marc Carney said on Thursday the Bank may ease its monetary policy to support the country’s economic growth. EURUSD fell 0.30% to 1.1090. Deutsche Bank stocks dipped 4% and Santander stocks fell 2.9% as their US divisions failed US stress tests once again. Moreover, the German Deutsche Bank has a too high derivative exposure which makes it the biggest potential risk to the global financial system, according to IMF. Royal Bank of Scotland stocks slumped more than 30% since Brexit on June 24 but partly rebounded then. It lost another 4.7% on Thursday as Morgan Stanley cut its rating on the stock. On the other hand, Italian banks advanced after the Italian government adopted a plan to allocate funds to the banks if needed. Still, investors remain risk averse and avoid European equities given economic uncertainty in the region. Today in the morning the Markit manufacturing PMI for June came out positive in Germany. The May unemployment fell in Italy from 10.6% to 10.5%. The UK’s and European manufacturing PMIs from Markit were on the rise. No more significant news is expected today in Europe.

Asian stocks advanced on Friday as global financial markets continued to recover from Brexit. MSCI index of Asia-Pacific shares outside Japan added 0.5%. Japanese Nikkei gained 0.7% as yen weakened after the strong growth this week. The yen rose 4.9% this week which is its record pace of growth since mid-April. USDJPY is traded at 102.81 yen up from 99.00 touched this week. South Korean KOSPI closed 0.9% higher today ending the week 3.2% higher.

Oil futures prices were advancing on expectations of rate cuts and improving imbalance of demand-supply. Brent crude was up 0.6% to $50.03 on Friday, up 3.4% this week. The WTI added 0.6% to $48.60 a barrel today, up 2.1% this week.

Gold continues gaining ground in the wake of Brexit as a safe-haven currency. It gained 0.9% to $1,333.70 an ounce rising more than 1.4% in a week.



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