20, April 2017

Markets recover after yesterday's losses amid oil rebound and European reporting data, US dollar under pressure

On Wednesday, US stock indices closed mixed with mostly downward bias, amid falling oil prices and corporate earnings data for the first quarter. Yesterday's unexpected drop in oil prices provoked a sell-off in the energy sector, and the fall in IBM stocks further worsened the situation. At the same time, the Nasdaq index closed in positive territory, receiving support from Intuitive Surgical stocks as well as from Lam Research Corp.

IBM shares fell 4.9% after the technical giant published weaker, than expected data on quarterly sales on Tuesday evening. This was the biggest one-day drop for the company since June, sending stocks to the lows of December.

Unexpected growth in gasoline inventories in the US hit the oil price, which led to a drop in the energy sector by -1.4%. Published yesterday Fed's Beige Book did not add optimism to the markets showing that wage growth does not always lead to an increase in inflation.

Today, the majority of European stock indices have gained, some positive sentiment returned to markets because of strong corporate data in Europe. That brought some positive to investors who are in the low expectations of the upcoming elections in France.

A few days left before the first round of the presidential elections in France, which start on Sunday. Polls show increased competition between the four candidates, which could become a destabilizing factor next week. Two candidates, Le Pen and Melanchone, among the leaders, are against the European Union. If one of these candidates wins in the second round on May 7, this could be the end for the Eurozone. In statistical front, the producer price index of Germany remained at the same level in March relative to the previous month, with a growth forecast of 0.1%. Futures for US markets are traded in the green zone today.

Oil prices partially recovered on Thursday after yesterday's decline caused by the publication of data on the growth of gasoline reserves in the US by 1.5 million barrels over the past week. Statements of the representative of Kuwait supported oil price that the OPEC agreement on reduction of oil production is expected to be extended by the end of the year.

Shares of energy companies are trading lower, and did not recover from a sharp drop in oil prices during the night. The shares of Lundin Petroleum and Tullow Oil suffered the most.

In the FOREX currency market, the US dollar is slowly declining relative to the basket of major currencies, amid unexpected strengthening of the euro, despite the approach of the first round of the presidential elections in France. British pound keeps on positive dynamic after the announcement of early elections in Britain this week.

Market expectations on the growth of interest rates in Europe have practically come to naught. Nevertheless, a poll conducted by Reuters showed growing expectations that the next step of the regulator would be a reduction in the volume of monthly bond purchases.