Global stock indexes fell on Wednesday. In our opinion, the main negative factor came from the United States. The Producer Price Index (PPI) growth in April was higher than expected and it was the highest for a year and a half (+0.6%). Its growth in March was also quite significant (0.5%). Now, year by year PPI is 2.1%. Investors fear that U.S. inflation may also increase to 2% per annum.
Recall that it will be announced today at 12.30 CET. The New York Empire Manufacturing for May is coming out simultaneously. Thereafter, we will see the industrial production index for April at 13-15 CET. The Philly manufacturing is coming out at 14-00 СЕТ. In our opinion, the forecast on the U.S. economic data is negative for the stock market. Nevertheless, futures on U.S. stock indices are rising this morning after European stocks. Note that the S&P 500 broke 1900 points on Tuesday for the first time and set a new historic peak.
European stocks are rising this morning before the important macroeconomic information is released. The German DAX set a new historic high due to 0.8% first quarter GDP growth in Germany. This was larger than expected. At 9-00 CET, we will see the first quarter GDP announced and inflation in the EZ for April. The forecasts are positive for the stock market.
The Japanese Nikkei Index closed with a slight loss. In our opinion, the strong yen increase in the sales tax from the first part of April may reduce corporate earnings. Investors even ignored the strong GDP growth in the first quarter (5.9% in annual terms). The data was released last tonight. The additional negative outlook was from Sony Corporation (NYSE:SNE). It is going to suffer losses for the second consecutive year. This news caused a drop in the share price by 6.9%. Note that today at 4-30 CET, there will be industrial production data for March released in Japan and there will be no other significant macroeconomic information expected for this week.
US Wheat prices tumbled to 3-week low, due to the favorable weather forecast in the Midwest over the next two weeks. The additional negative outlook came from China National Grain and Oils Information Centre (CNGOIC), that reported that total cereal production (wheat, maize, and rice) in the season 2014/2015 is expected to increase by 1.7% to 552.14 million tons. Meanwhile, the import of the three crops into China will be reduced by 34.3% to 11.5 million tons. The wheat crop will be at 122.6 million tons, 0.7% higher than in the previous season. Its imports, according to CNGOIC, reduced to 3 million tons from 7 million tons a season earlier.
The price of corn decreased significantly due to rumors that China could already start selling 70 million tons from its state reserves next week. The additional negative factor, as in the case of wheat, was the CNGOIC forecast. Corn production in the season 2014/2015 may increase by 2% and reach 222.1 million tons. While its imports are expected to decline to 3.5 million tons from 5.5 million tons last season.
Brent Crude fell slightly after the announcement by the American Agency Energy Information Administration about its 78,000 barrel per day (bpd) production increase to 8.43 million bpd. This is due to the active development of Bakken shale in North Dakota and Eagle Ford in Texas. Meanwhile, another agency - the International Energy Agency (IEA) increased its global oil demand outlook this year and lowered its forecast for production by non-OPEC countries due to problems with the Kashagan oilfield in Kazakhstan, as well as oilfields in Colombia and South Sudan. According to the IEA, OPEC must urgently increase production to 30 million bpd. This issue will be discussed at the meeting in June. OPEC has increased production by 405,000 bpd to 29.9 million bpd in April. However, it could not reduce quotas significantly as we can see. Note that according to the majority of European consumers the acceptable Brent Oil price is $102 per barrel.