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Awaiting fresh guidance from Fed : 27.05.2016 by IFC Markets

US stocks were almost flat today on Thursday ahead of national holiday and Janet Yellen speech. US dollar index, a measure of a greenback’s value against a basket of six major currencies, fell on Thursday 0.2% but later rebounded 0.1% in light trading ahead of national holidays (see dollar index live). The US markets will be closed on Monday due to the Memorial Day. The US dollar gained 2.3% so far this month being one of the top performers among currencies thanks to the recent hawking comments from Fed supporting the June rate hike. Dow Jones industrial average lost 0.13% to 17,828.29 while Nasdaq rose 0.14% to 4,901.77. S&P 500 index dipped 0.02% to 2,090.1. Today at 14:30 CEST the second reading of US Q1 GDP came out revised up but less than expected. At the same time, the personal consumption expenditures for Q1 were in line with expectations. Today at 19:00 CEST the Baker Hughes oil rig count will come out, the current number of active oil rigs is 318. Today at 19.15 CEST the Fed Chair Janet Yellen will speak in Harvard University where she may give hints on timing of Fed rate hikes.

European stocks steadied on Friday supported by pharmaceuticals and outperforming Swiss market. The Swiss drug maker Roche edged up 3.8% on successful clinical testing of new cancer drug. However, the gains were offset but weak performance of bank and energy stocks as Brent oil prices started retreating. EURUSD stood at $1.1190 above its 2-month low of $1.1129 hit on Wednesday. The pan-European FTSEurofirst 300 index edged up 0.1% and is near its one-month high reached earlier this week. As a rule, stronger US dollar pushes up the European shares as European exporters benefit from cheaper euro. The UK markets will be closed on Monday due to the Spring bank holidays. No significant data is expected today in Europe.

Japanese stocks edged higher in thin trade on Friday as sales tax hike may be postponed and on higher chances for the US Fed June rate hike. The Nikkei index added 0.4% to 16,834.84 closing the week 0.5% higher. Topix gained 0.5% to 1,349.93. Exporters were mixed as yen slightly weakened but remained volatile ahead of Janet Yellen speech. Panasonic Corp lost 0.4% while Sharp Corp added 4.3% and Mazda Motor Corp rose 0.6%. Toshiba Corp was one of the top performers: its stocks sky-rocketed 11% as JP Morgan revised up its outlook for the company from “underweight” to “overweight”. The trading was light with turnover being the lowest since late December 2015. USDJPY strengthened 0.1% to 109.85 yen down from 3-week high of 110.59 set last Friday. Japan’s Prime Minister Shinzo Abe may delay a sales tax hike planned next spring by about two years on fears it may push the economy back into deflation. Such a delay may support Japanese stocks even more and weigh on safe haven yen.

Oil futures prices dipped in Asian trade on Friday down from the 7-month high of $50 a barrel hit on Thursday on supply disruptions in Canada and African countries. Oil fell on worries higher prices could stimulate higher oil output causing bigger oversupply. Brent futures prices lost 0.7% to $49.25 on Friday while WTI futures lost 0.6% to $49.17 a barrel. The meeting of OPEC countries is scheduled on June 2 and may give some hints on future direction of the market. Another concern is the Fed meeting where the interest rates may be hiked. Higher rates are to lead to stronger US dollar which will push oil prices up.

Gold continues looking down on Friday for the fourth week already on rising concerns the Fed will hike the rates as early as in June. Higher rates will push the US dollar up and make the non-yielding gold less attractive. The gold has risen 15% so far this year although it lost already 4.5% after the hawkish Fed minutes released last week. The spot gold is traded today at $1,220.30 an ounce having bounced from the earlier low of $1,211.30. Gold futures with delivery in June lost 50 cents to $1,219.90.

Source: http://www.ifcmarkets.com

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