Weekly reviews

We expect increased volatility this week

On Friday, European stock markets ended the day without showing significant dynamics. Last week was extremely volatile for European markets, as almost all European exchanges have completed it in the red. The focus was on the long-awaited inauguration speech of the new president of the United States. On the contrary, US market managed to finish the week moderately positive. The long-awaited speech failed to strengthen the investor’s positive sentiment or to form any market direction. Markets have not heard specifics regarding the alleged actions, and judging by the dynamics of the FOREX market (further US dollar decline) markets have been disappointed. The new trading week starts with restraint. Asian stock markets closed mixed, influenced by factors of regional currencies gains and American administration's policy on the Asian markets.

Today, European stock indexes traded in the red amid European currency gains. There is concern about protectionist rhetoric of the new US president. The European market is more sensitive to protectionist policy, in comparison to the US market. In addition, on Sunday, Trump said that he plans to start negotiations with Canada and Mexico leaders on the revision of the Free Trade Agreement of North America (NAFTA).

Investors fear that the policy of the new US administration may lead to a drop in world trade volumes and as a result, the stock market decline.

Increasingly, market analysts have expressed concern that such a policy could lead to a trade war around the world. On the news front today, investors are waiting for the ECB chairman’s speech, Mario Draghi will try to calm down the markets and will report further details on European regulator economic policy.

The oil market on Friday moved to a relative gain, according to our expectation. Brent crude oil returned to a range of $ 55.57 per barrel. The meeting of OPEC + confirmed our expectations regarding the positive sentiment - OPEC representatives reported that the production is reduced in accordance with the agreement. At the same time, US production rise is the risk factor for the whole oil market as the number of drilling stations has increased by 29 units. We maintain our forecast  for Brent oil market as trading range in the coming days will remain the same $ 54-56.40.

Previous week was volatile and full of news and contradictory factors. However, the week managed to end neutrally. Markets were able to resist the sales, at the same time the previous positive sentiment completely exhausted. US president’s speech has been met warily by Asian and European markets. As for US investors, we will know their reaction today. At the same time, the inauguration speech could not change the market disposition or lead to asset relocation at least for a while: we have not seen panic sell-off. New week will provide data on the US economy (durable goods orders, PMIs) and is likely to be extremely volatile.

chart 01.2017

chart 01.2017

chart 01.2017