Good Morning


The major European indices traded higher in yesterday’s session after two days of declines and further concerns on Iraq. The major Euro Stoxx 50 index added 0.43% to its opening, closing at 3275.33. The UK’s FTSE 100 ended its session marginally higher, increasing 0.18% whilst the DAX added 0.37% to close at 9920.32. France’s CAC 40 added more than half a percentage point, also ending the day’s trading in positive territory, closing at 4536.07

The German Investor Confidence Index fell the sixth month consecutively even though the ECB announced further stimulus aimed at preventing deflation and spurring further economic growth in the Euro Area. The Index, which aims to predict economic developments six months in advance, dropped to 29.8 this month from the its level of 33.1 in May. Analysts were expecting an increase to 35 rather than a drop. German unemployment unexpectedly rose in May since January whilst business confidence declined. Lufthansa, Europe’s second largest airline, cut its earnings forecasts putting downward pressure on the company’s stock trading.

The lowest inflation levels over these last four and a half years were recorded in Britain, playing down the expectation of an earlier increase in interest rates as explained by the BoE governor Mark Carney, last week. These words had put pressure on market trading were the FTSE index recorded a drop of 1.2%. The UK CPI rose 1.5% in May, the lowest increase since October 2009. This was also lower than the previous month’s increase of 1.8%. An increase of 1.7% was expected.


After a mixed trading session yesterday, the three major US indices followed the European indices, coming to a close in positive territory. The Dow Jones Industrial ended trading higher by 0.16% closing at 16808.49. The S&P 500 followed suit adding 0.22% to its opening level to reach 1941.99. The Nasdaq Composite recorded the largest increase in percentage terms, rising 0.37% to close at 4337.23. The small companies index, the Russell 2000 also advanced to its record over the previous two months.

These trading levels came on the back of mixed economic data published. The Consumer Price Index (CPI), a measure for inflation, rose 0.4% in May over its previous month’s reading. This increase superseded economists’ expectations of 0.2%. If one had to exclude the volatility in the food and energy prices, the reading would show an increase of 0.3%, still greater than expectation. The consumer prices for May were 2.1% higher when compared to the same price basket reading for the previous year. This is arguably another positive sign of improvement which may fuel further tapering by the Fed as inflation moves further towards the Fed’s target level. This reading may also be seen as the culprit for an increase in the value of the Greenback and the drop in Treasuries prices. The 10 year yield increased to 2.65%, adding 6 bps whilst the Dollar added 0.3% against 10 major currencies.

On the other hand however, the computation for housing starts shows a drop of 6.5% in May. This drop is much greater than what was expected which was less than half the figure reported. Building permits in the US were also down by 6.4% for the month of May.

Meanwhile, much of the expectation of worldwide investors will be on the Fed’s policy decision which will conclude the FOMC (Federal Open Market Committee) two day meeting which commenced yesterday. The Fed will give investors further insight on its tapering exercise, possibly reducing its asset purchases by a further $10 billion, extending the tapering into the fifth consecutive month.

Furthermore, there has been a growing expectation that the Fed will raise its benchmark interest rates faster than money market investors expect. The Fed is also expected to present an updated set of quarterly forecasts for economic growth, unemployment and inflation, together with the benchmark for the Federal funds Rate towards the end of the meeting.

Have a Good Day,