Market Commentary: Commodities continue to drop, US Dollar gains against peers

The global equity market, as represented by world equity indices, is trading at an all-time high as yesterday equity markets from Sydney to Hong Kong, London and New York registered gains.

In the US the Dow Jones Industrial Average added 20.17 points to 16,976.24 approaching the landmark 17,000 figure for a second day in a row.

The Standard & Poor’s 500 closed just below the 2,000 mark. Both indices are trading just below important psychological barriers that if exceeded will provided further support to the bull market. Asia-Pacific equity indices closed at the highest level since early June and are heading for their eighth straight weekly advance.

Commodities, on the other hand, continued to drop. Gold is trading at $1,322.71 and West Texas Intermediate crude oil dropped 0.4 percent to $104.11 a barrel. Brent crude fell 0.2 percent to $111.02 a barrel, aided by additional supply from rebel held Libyan ports.

As the U.S. economy continues to recover and employment improves, the Fed is expected to persist with its monetary tightening policy. The U.S. dollar is expected to continue gaining against major peers, which is bearish for precious metals and commodities.

The gains in global equities follows what appears to be a steadying of the global economy. In the U.S. ADP Research Institute data showed that U.S. employment rose in June by most since 2012, exceed most economists’ expectations. If employment data in the U.S. continues to be supported by positive payroll data before the weekend than further positive movement may be expected in equity markets and the U.S. dollar.

Activity in China’s services sector expanded at its fastest pace in 15 months in June, according to a survey by HSBC. This expansion in the service sector reinforces the recovery seen in the manufacturing sector seen in June and indicates a broad-based improvement in the Chinese economy. Markets expect accommodative policies on both the fiscal and monetary fronts, in China, over the coming months.

In Europe, the European Central Bank meets today after enacting unprecedented stimulus last month. Economists are in disagreement about how long interest rates will stay near zero and are requesting details on a plan to boost lending. ECB president Mario Draghi is expected to provide direction in his speech today.

This article was issued by Calamatta Cuschieri, visit www.cc.com.mt  for more information.

The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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