Global Indices Advance As Chinese Stocks Increase

Global indices advanced yesterday, as Chinese stocks increased 6%. The trend continues this morning. Shanghai Composite has added 10.3% for 2 days, recording the best 2-day result since September 2008. It happened because the government introduced a number of market regulations that cut commissions and banned some holders from selling stocks. No important macroeconomic news was released yesterday in the USA, but we would like to point out that the weekly unemployment rate appeared to be a bit worse-than-expected. Corporate news and other statistics were generally neutral. The largest pharmacy network, Walgreens Boots Alliance (NASDAQ:WBA), raised this year's income forecast, so its shares gained 4.2%. Coty Cosmetics (NYSE:COTY) reported buying P&G beauty business for $12.5 billion and lost 4.5%. Yesterday, the American stocks turnover was 7% below the weekly average, making 6.6bln shares. Janet Yellen will speak today at 18:00 CET, which is considered the most significant event this week. Market participants are looking forward to know about the rate hike. Besides, wholesale inventories in May will be published at 16:00 CET; the tentative outlook is moderately negative.

Dow Jones Weekly Chart

Dow Jones Weekly Chart

European stocks and the EUR/USD have been growing today, due to concessions made by the Greek government. It intends to acquire €53.5bln in exchange for tax reforms aimed to increase budget income and pay off debts. As far as particular stocks are concerned, United Internet AG (XETRA:UTDI) (Germany) added 4.5%, French AXA (PARIS:AXAF) edged higher 4.3%, and the largest Norwegian bank DNB (OSLO:DNB) inched 4.2%. Greek stocks are closed until July 13th. Eurozone leaders will hold a special meeting July 12th to discuss the Greek proposal. No important economic data are expected today in the EU.

Nikkei has been expanding for two consequent days with other global indices. Before, it nearly witnessed the strongest 9-month fall. However, at the moment, we see that the overall drop will be less dramatic because of the rebound. Expectations of Chinese stock stabilization weighed on the demand for the yen, driving it down. It is worth mentioning that Machinery Orders growth clearly outstripped forecasts. We believe that this factor, together with the cheap yen, produced additional support for Japanese stocks. Bank and Food market sectors scored the best results.

International Monetary Fund slightly lowered the economic outlook for 2015 (from 3.5% to 3.3%) and left unchanged the forecast for 2016 (+3.8%). It cut US and Japan growth forecast as well. The analysts expect that oil will cost on average $59 per barrel this year. While the situation in Greece and China becomes stable, global oil prices and other commodities advance. According to International Energy Agency, the global oil demand will expand next year 1.2mln barrels daily – less than in 2015 (1.4mln barrels increase). The agency highlights oil oversupply on the world market.

Wheat Weekly Chart

Wheat Weekly Chart

American National Weather Service said there is 90% chance of El Nino continuing through the winter. There is 80% chance it will last through the spring. Japan Weather Bureau also expects El Nino this winter. We remind that this natural phenomenon causes drought and floods in pacific Region and makes agricultural futures more expensive.