Investors reacted negatively to the statement by the Fed representative - 27.6.2014

The world stock market had the prices decreased on Thursday. The macroeconomic data in the U.S. was neutral. However, investors reacted negatively to the statement by the Fed representative, James Bullard said the increase in interest rates should be implemented as soon as possible.

According to him, inflation may exceed 2% already this year and unemployment is able to drop below 6%. On investigation of the Barclays bank activity on the stock exchanges, its shares fell by 7.4%. This has contributed to declines in Bank of New York Mellon, Citigroup, Morgan Stanley shares and of other credit institutions. The trading volume on the U.S. exchanges was 9% lower than the monthly average and was 5.1 billion shares. Today, we will see the consumer confidence index from the University of Michigan in the final reading at 13-55 CET. The forecast is moderately positive.

The EU had no significant economic data released yesterday. Stocks fell in line with the global trend. Today we will see the Economic and Consumer Confidence in the EZ at 9-00. At 12-00 it will be announced about inflation in Germany for June. The prognosis is also positive as well as for the US.

The Nikkei prices dropped to a minimum of one and a half weeks on the Japanese Yen strengthening to a maximum of five weeks. Investors believe that the "strong" Yen increases the exporters expenses. Note that the strengthening of its rate was due to decent Japanese economic data released tonight. Unemployment fell to its lowest level since 1997 and amounted to 3.5%. Increase in inflation (excluding fresh food) by 3.4% per annum, though it was the highest of 32 years, but it was expected amid rising taxes and may be changed by a more moderate growth of 1%. The only disappointing indicator was the household spending, decreasing more significantly than expected. Market participants hope that this is sales tax growth impact continuing since April 1st, which will soon be over.

The Oil significantly decreased on the stabilization of the political situation in Iraq and Libya. In previous reports, we noted that oil production in Iraq was not affected by the armed conflict. It has increased by 300 thousand barrels per day In Libya, due to the Phil El field inclusion in the south-west of the country. The U.S. crude inventories rose last week by 1.7 million barrels, despite there was the decline expected.

The Natgas prices fell down. German BASF chemical company, and the Brazilian Braskem plan to invest $72 billion in its U.S. subsidiaries, if the Gas remains cheap and affordable. They also can invest in its production in the United States. Note that the Gas costs about $4.5 per million British thermal units in the United States, while it is twice as expensive as in Europe (about $9).

The Grain prices slightly decreased. The International Grains Council Association forecasts that its global reserves by the end of the season 2014/2015 would reach a maximum of fifteen years and will make 412 million tons against 400 million tons in 2013/2014. The Strategie Grains company raised the Wheat crop forecast in the EU by 2 million tons to 139.4 million tons. Recall that the USDA report will be released on Monday. Market participants expect an increase in soybean exports for the week, which could support its quotes.

The Datagro local agency lowered the sugar crop in Brazil in the season 2014/2015 by 5.8% to 32.3 million tons due to the drought. World production could be reduced from 560.5 million tons to 596.9 million tons in 2013/2014. This will lead to a shortage of sugar in the world at 2.46 million tons. An additional factor may be the decision of Brazilian Government to increase the maximum allowable share of ethanol in local gasoline from 25% to 27.5%. This will require an additional 1.1 billion gallons of ethanol per year. A part of sugarcane in the country is processed into fuel.