CFD Markets News and Forecasts — 23-05-2018

Major US stock indexes finished trading in positive territory, which was helped by a decrease in bond yield after the publication of the minutes of the Fed meeting

The protocol reported that during the May meeting, Fed officials signaled the likelihood of a rate hike in June. In addition, they discussed the question of how to characterize the strategy of the Central Bank, which intends soon to abandon attempts to stimulate economic growth. "If the dynamics of growth will meet expectations," probably, it will soon be expedient to take another step "towards higher rates, the protocols say.

Recall, following the results of the two-day meeting, which ended on May 2, the Fed kept the interest rate unchanged, in the range of 1.5% -1.75%, but did not rule out further rate hikes in order to normalize monetary policy to the equilibrium state.

A certain influence on the course of trading was provided by the US data. As it became known today, the growth of the US private sector in May increased, while the inflation of procurement rose to almost a five-year high. Private sector companies in the US said they were confident and accelerated growth in business activity in May, adding evidence of recovery in sustained growth in the second quarter of 2018. The seasonally adjusted Composite Index (PMI) of IHS Markit in the US reached 55.7 in May, compared with 54.9 in April, the highest for three months, and was well above the neutral level of 50.0.

However, the report, published by the Ministry of Commerce, pointed to the rollback in sales of new homes in the US in April. The report said that sales of new homes fell by 1.5% in April, to an annual rate of 662,000 units. Meanwhile, the indicator for March was revised downwards - to 672,000 units from 694 thousand units. Economists had expected that sales of new homes would drop to 679,000 units.

Most of the components of DOW finished trading in the red (16 of 30). The growth leader is McDonald's Corporation (MCD, + 1.30%). Outsider - General Electric Company (GE, -7,33%).

Most sectors of the S & P recorded a rise. The utilities sector grew most of all (+ 0.6%), while the commodity sector showed the greatest decline (-1.2%).

At closing:

Dow 24,886.81 +52.40 +0.21%

S&P 500 2,733.29 +8.85 +0.32%

Nasdaq 100 7,425.95 +47.50 +0.64%

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.8 million barrels from the previous week. At 438.1 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year.

Total motor gasoline inventories increased by 1.9 million barrels last week, and are in the upper half of the average range. Finished gasoline and blending components inventories increased last week.

Distillate fuel inventories decreased by 1.0 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories increased by 0.7 million barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories increased by 6.7 million barrels last week.

Sales of new single-family houses in April 2018 were at a seasonally adjusted annual rate of 662,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.5 percent below the revised March rate of 672,000, but is 11.6 percent above the April 2017 estimate of 593,000.

The median sales price of new houses sold in April 2018 was $312,400. The average sales price was $407,300.

U.S. private sector firms signalled a robust and accelerated rise in business activity during May, which adds to evidence of a sustained growth rebound in the second quarter of 2018. At 55.7 in May, up from 54.9 in April, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index was the highest for three months and well above the crucial 50.0 no-change value. A faster rise in service sector output was the key factor behind the acceleration in overall business activity.

Manufacturing production increased markedly, but at a slightly softer pace than in April. Another strong upturn in new business volumes helped to boost output growth in May. Survey respondents commented on resilient domestic demand and a supportive economic backdrop. Higher workloads contributed to the sharpest rise in unfinished business since March 2015.

• Turkey must show it will not allow speculative depreciation of lira through measures

U.S. stock-index futures fell on Wednesday, as investors continued to digest geopolitical developments, while awaiting the release of the minutes from the FOMC latest meeting.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Freeport-McMoRan (FCX) upgraded to Buy at B. Riley FBR, Inc.; target raised to $20

• Says scale of lira volatility has a dangerous side, monetary policy should manage

• Necessary steps should not be delayed

Retail sales grew at a modest pace in the year to May, following a tricky start to 2018, according to the latest CBI Quarterly Distributive Trades Survey.

Sales volumes remained a little below average for the time of year to the same degree as in April, with a similar picture expected for June. Orders placed on suppliers were slightly up over the year to May, with similar growth expected next month.

Across the retail sector, growth in sales volumes was reported in grocers, hardware and DIY and non-store goods (i.e. internet and mail order). Sales fell in specialist food and drink, clothing, footwear and leather, furniture & carpets, recreational goods and other normal goods. Growth in internet sales volumes in the year to May was largely unchanged compared with April, but is expected to accelerate in June.

• Have more staff looking at China than any other single overseas economy

• Australia, China together can be 'strong voice' for importance of open international trade, effective regional co-operation

• Single biggest risk to Chinese economy lies in financial sector and the big run-up in debt

UK house prices grew by 4.2% in the year to March 2018, unchanged from the year to February 2018. The UK Property Transaction Statistics for March 2018 showed that on a seasonally adjusted basis, the number of transactions on residential properties with a value of £40,000 or greater was 92,270. This is 11.8% lower compared to a year ago. Between February and March 2018, transactions decreased by 7.2%.

The headline rate of inflation for goods leaving the factory gate (output prices) was 2.7% on the year to April 2018, which is unchanged from March 2018.

Prices for materials and fuels (input prices) rose 5.3% on the year to April 2018, up from 4.4% in March 2018.

All industries provided upward contributions to output annual inflation; the largest contribution was made by other manufactured products.

The rate of input annual inflation increased for the second consecutive month; crude oil continued to provide the largest upward contribution.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 2.2% in April 2018, down from 2.3% in March 2018.

The rate has fallen back from a recent high of 2.8% during autumn 2017 resulting in the April 2018 figure being the lowest observed since January 2017.

The largest downward contribution to the change in the rate came from air fares, which were influenced by the timing of Easter.

Rising prices for motor fuels produced the largest, partially offsetting, upward effect.

The Consumer Prices Index (CPI) 12-month rate was 2.4% in April 2018, down from 2.5% in March 2018.

The IHS Markit Eurozone PMI fell from 55.1 in April to 54.1 in May, according to the flash reading which is based on approximately 85% of usual replies.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: "The May PMI brought yet another set of disappointing survey results, though once again a note of caution is required when interpreting the findings. While prior months have seen various factors such as extreme weather, strikes, illness and the timing of Easter dampen growth, May saw reports of business being adversely affected by an unusually high number of public holidays. "Furthermore, despite the headline PMI dropping to an 18-month low, the survey remains at a level consistent with the eurozone economy growing at a reasonably solid rate of just over 0.4% in the second quarter".

Business activity rose at the weakest pace for over one-and-a-half years, with the month also seeing slower increases in both new orders and employment. Business confidence towards the outlook meanwhile slipped to its lowest since November 2016.

The IHS Markit Flash Germany Composite Output Index fell to a 20-month low of 53.1 in May, from April's 54.6. The Index has now decreased in each of the past four months from a near sevenyear high at the start of the year. The latest slowdown reflected weaker rates of growth in both service sector business activity and manufacturing output, with each rising the least since late-2016.

May data signalled a renewed slowdown in French private sector output growth. Indeed, at 54.5 in May, down from 56.9 in April, the IHS Markit Flash France Composite Output Index highlighted the weakest rate of expansion since the start of 2017. The moderation in overall output growth was driven by the services sector, where the rate of increase in activity was the softest for 16 months.

In contrast, manufacturers registered a sharper rise in output in May. Moreover, the rate of expansion was marked in line with the average seen in the current 21-month sequence of expansion.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1934 (2261)

$1.1875 (1470)

$1.1838 (685)

Price at time of writing this review: $1.1756

Support levels (open interest**, contracts):

$1.1696 (3073)

$1.1662 (2960)

$1.1624 (3035)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 8 is 154855 contracts (according to data from May, 22) with the maximum number of contracts with strike price $1,1500 (7206);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3629 (2830)

$1.3559 (972)

$1.3508 (228)

Price at time of writing this review: $1.3400

Support levels (open interest**, contracts):

$1.3363 (1195)

$1.3335 (2437)

$1.3304 (1828)

Comments:

- Overall open interest on the CALL options with the expiration date June, 8 is 38866 contracts, with the maximum number of contracts with strike price $1,3600 (2830);

- Overall open interest on the PUT options with the expiration date June, 8 is 40873 contracts, with the maximum number of contracts with strike price $1,3400 (2437);

- The ratio of PUT/CALL was 1.05 versus 1.05 from the previous trading day according to data from May, 22.

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

• Believes New Zealand budget's revenue assumptions achievable, given projections for revenue growth broadly in line with nominal GDP growth

• Urges Saudi to resist temptation to re-expand government spending in line with higher oil prices

• Flash Japan Manufacturing PMI declines in May to 52.5, from 53.8 in April.

• New order growth softens to nine-month low.

• Input prices rise at the fastest pace since January 2014

Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said: "Despite the promising upturn in April data, May's flash release erred on the side of disappointment as the headline figure signalled the weakest expansion in manufacturing growth in nine months. "Employment growth eased, in line with a weaker accumulation of work backlogs due to softer demand pressures. That said, new export sales expanded faster amid the recent dollar strength vs. JPY."

• Says will need to work with new Italian govt to ensure it implements its European commitments

• Not in Russia's interest to keep Syria status quo, must work for collective solution to crisis