Dow Jones and S&P 500 set new historical highs | IFCM Hong Kong
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Dow Jones and S&P 500 set new historical highs - 9.6.2014

Global equity markets continued their growth on Friday. The U.S. stock indices such as Dow Jones and S&P 500 set the historical highs. They gradually have been growing for more than a year. As a result, the VIX volatility index, also known as the "measure of fear", fell to its lowest level since February 2007, 10.73 points.

The VIX index is calculated by the Chicago Board Options Exchange (CBOE). Historically, the low values of this index can implement the trend correction. The growth in stock prices on Friday was occurred because of the positive economic data from the United States. The NFP for May was in line with expectations and reached 217 thousand people. Thus this figure exceeds the level of 200 thousand for the 4th month in a row for the first time since January 2000. Today, we do not expect any significant economic data from the U.S. American futures indexes are "in the red".

The European stocks indexes rose on Friday and continue to rise slightly today. In our opinion, they are still trying to win the ECB rate cut back and move in line with the global trend upwards. The Stoxx Europe 600 is traded with the «price to projected earnings» equal to 15.5. This is the highest level since 2009, which may mean approaching the fundamentally overrated area. Since the prices began to be ahead of corporate earnings. However, this factor will greatly affect the market only when the Q2 reports come out. Note that, in our opinion, there will be no critical economic data in the EZ expected on Thursday.



The Japanese Nikkei continued to rise along with other global indexes. Its growth has also contributed to the GDP growth figure revision for the first quarter of the second reading, upward to 1.6% from 1.5%. In annual terms, the Japanese economy grew by the solid 6.7%. In addition, the consumer confidence index rose in May to 39.3 points, better than expected. Note that this is the first increase within six last months. The more significant Nikkei growth was prevented by the Yen (USDJPY) strengthening.

On Sunday, there were the good data on Chinese foreign trade out. It can support the commodity futures in the future,since China is the largest commodity consumer in the world. Its trade surplus rose in May to the maximum of 5 years and reached $35.92 B., which is approximately 1.5 more than expected. Note that this growth was occurred largely due to reduction in imports. This had a negative impact on the prices of the relevant goods. Thus, the Copper imports to China fell in May to 15.6% compared to the April level of 380 thousand tons. Today, it gets cheaper for a fifth day in a row due to investigation of the Qingdao seaport credit conditions by the Chinese authorities. The soybean imports decreased by 8.2% compared to the April level of 6.5 million tons. The Oil imports fell by 9.4% to 6.14 million barrels per day. Note that unlike other commodities, the Oil price have not fallen because of the demand reduction from China.



As it was anticipated in the previous review, the Wheat comes expensive for the second consecutive day. Market participants fear the reduction in the winter wheat crop in the U.S. due to the bad weather conditions and cover their short positions. There is the drought observed in Texas, Oklahoma and Kansas. The official U.S. forecast for the crops will be released on Wednesday.



The Cotton price continued to decline due to the post about the growth of agricultural land under it in India by 3.4% to 12 million hectares, for the first time since 2011. Note that the Cotton in India is $0.8773 per pound. It's a bit more expensive than in the U.S. price at $0.8488. The cotton quotes plummeted since early May by 15%. This was due to the reduction in Chinese imports by 64% in the first quarter of this year. Since China has decided to sell a part of the old cotton stocks. We do not exclude the price restoration when it is done. The International Cotton Advisory Committee predicts the cotton crop decline in China in the season 2014-2015 by 10% to 6 million tons due to possible drought. Simultaneously, Indian Cotton Association expects a decline in cotton imports from India by 300 tons compared to 2013-2012.

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