As we suggested in the previous review, on Friday the Dollar index rose for the first time during a week. The reason of this was higher-than-expected Michigan consumer confidence index. Today at 13-30 CET we are expecting for information on retail sales for March from the USA and 15-00 CET (U.S. wholesale inventories). Preliminary forecasts, in our opinion, are positive for the U.S. Dollar.
Stock indices S&P 500 and Nasdaq reduced per week by 2.6% and 3.1%, respectively, and it turned out to be the highest since June 2012. Negative dynamics of the market on Friday were supported by weak quarterly reporting of J P Morgan Chase & Co (NYSE:JPM) and rising March producer price index by 0.5%. This is its biggest increase in the past nine months. Investors fear a possible reduction in the profitability of corporations due to inflation.
This morning the Euro continued to decline. Over the weekend, ECB President Mario Draghi said that the ECB does not exclude further monetary policy easing, and it firmly reiterates that it continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time. In the last 12 months strengthening of the Euro against the U.S. Dollar was 5.5% and against the Japanese Yen 10%. Today at 17-45 CET the head of the French Central Bank and the ECB Governing Council member Christian Noer will speak. After Mario Draghi's speech the majority of market participants has decided that the ECB does not want to strengthen the Euro above 1.39 Dollar, although no specific numbers were mentioned. It is possible that Christian Noer's statements will be more specific. According to the U.S. Commission on commodity futures trading, the amount of net purchase positions (net longs) in the Euro decreased by 23.3 thousand per week - to its lowest level since late February.
The Head of the Swiss National Bank (SNB), Thomas Jordan, said that Switzerland can benefit from easing monetary policy in the Eurozone in case of Swiss Franc weakening in tandem with the Euro. Recall that in September 2011 the SNB does not allow the strengthening of the Swiss currency less than 1.2 Francs per Euro. This level may become a strong support. This year the SNB expects zero inflation. In 2015 it is expected to reach 0.4%. Swiss GDP growth this year could be around 2%.
The cost of the Cattle (Fcattle) reached a new historic high. Japan has reduced import duties on Australian meat cattle, thus opening its domestic market for Australian producers. Negotiations with the United States, about which we wrote in the previous reviews, is not yet finished. Australia is the world's third largest producer of beef after the United States and India. A message regarding increase in cattle imports to China by 40% last year has contributed to beef prices rising. About 2014 opinion was divided. USDA predicts a drop in beef exports to China this year by 10% due to high prices and increasing domestic production to 5.76 million tons. Organization for Economic Cooperation and Development expects beef exports to China will grow annually by 7% during 8 years until it reaches 850 thousand tons. It should be noted that the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) expects that exports of Live Cattle from Australia this year will be the highest for six years (600 thousand). We believe that futures prices for cattle will depend heavily on the news about its real consumption in China and progress of negotiations between Japan and the USA.
The cost of the Copper rose after the Glencore Xstrata sold its stake in copper deposit in Peru to Chinese consortium for $6 billion.