On Friday, the slight gains of European markets continued. However, expected profit taking did take place primarily in the banking sector and in the metals sector of Eurozone. At the same time, Brent return above $55 brought European indexes in the green, and Friday's closing proved positive. The data on the trade balance of the Eurozone was unexpectedly disappointing. The data showed a decline in the trade balance surplus, which fell unexpectedly strongly by 24.2% (from 26.5 to 20.1 billion. Euros, while the figure expected to grow to 29 bln. Euro), year-to-year data also declined 13.4%. Export of goods from the euro area declined in annual terms by 5% in October. (FTSE + 0,18%, DAX + 0,33%, CAC + 0,29%)
In the US stock market the profit-taking took place as well as indexes were close to historical highs. In the United States, the market technical factor dominated -overheated markets and the renewed strengthening of the American currency. Signs of the possible geopolitical tensions between China and US might also provided its pressure on the American players sentiment. (Dow -0,04%, SP 500 -0,18%, Nasdaq - 0,36%)
In today's trading Europe is trading mixed with a predominance of negative tendency.
The European banking sector started the week negative, led by the Italian Banca Monte dei Paschi di Siena at -7.6%. The bank is experiencing problems with its own liquidity and if the bank fails to raise funds, the Italian Government will be forced to support the bank. Investors are also concerned about the developments in Asia, where rising complications between China and the United States, could have a negative impact on world trade. On Friday, Chinese warship captured underwater drone of US Navy in international waters off the coast of the Philippines. Both countries said that over the weekend reached an agreement on the return of equipment.
Oil prices continue to support the energy sector. Economic data from Germany apeared better than expected
The business expectations index in Germany in December remained unchanged at 105.6, as analysts expected.
Assessment of the current situation in Germany, in December, 116.6, 115.9 at the forecast of analysts.
IFO business climate index in Germany, in December, 111.0, 110.7 at the forecast of analysts.
American indexes futures opened a new week in the confidence of green zone.
Brent oil market managed to return above the psychological level of $ 55 per barrel, trying to stabilize on current levels. Solid settlement at these levels would permit to talk about Brent possible return to the area of the annual maximum ($ 57.70- $ 58) However, amid strong US dollar and a lack of positive fundamental background we think that to talk about it seems premature. This week, we expect that the trading will be held around the level of $ 55. From a technical point of view, Brent may decline to the area of the first significant support for 53 dollars per barrel.
In the FOREX market, the US dollar continues to look very strong. Dollar index remains above 102 points. Based on US rising inflation expectations and the Fed hints of faster pace of interest rate hike, we expect further gains of the American currency in the short term. Today, the European currency is making feeble attempts to recover in the area Eur1.04 now trading at lows of 2003. EUR / USD decline may continue to EUR- USD parity and this is quite a possible scenario. USD / JPY is trading around strong resistance JPY118, but the momentum of growth may well reach JPY120.
Last week data of new buildings in the US and slowing wage growth can bring more restrained expectations in interest rates hike next year. Analysts write about the consensus expectations of a 2 increase for the coming year. In our opinion, it is not very different matter and the current trend for the US dollar. This week markets will try to stay at current levels, though the risk of correction on the background of profit taking is quite likely. Today, the market focus is on the US PMI data in the services sector. The week promises to be rich and interesting.