Chinese news contributes to fallen prices

World markets dropped on Friday. There was no especially important macroeconomic data in the United States. The corporate sector news contributed to the fallen prices. Chinese e-commerce company Alibaba held a highly successful initial public offering (IPO) and raised $25 billion. Its stocks rose by 38% for the day. Investors fear that Alibaba can compete with American high-tech companies such as eBay and others.

It should be noted that Yahoo stocks fell by 2.7%. It happened despite the successful sale of the company stake to Alibaba in the amount of $8 billion. As a result, these events encouraged the fall of NASDAQ-100 and S&P500 on Friday. The index of companies from traditional economic sectors – Dow Jones closed “slightly upward”. The volume of trading on American exchanges amounted to 8.7 billion stocks, which is 53% higher than the monthly average. Besides IPO Alibaba, this was facilitated by the repayment of futures and options on a number of stocks and indices. Today Existing Home Sales in August will be released at 14-00 CET in the United States. The outlook is neutral. Moreover, the statements of two Fed officials are expected to be given at 14-05 CET and 23-30 CET. Note that the American dollar remains near two-year high, and is not very responsive to the negative data of the stock market. Investors still count on the tightening of the Fed monetary policy.

On Friday, European investors had a very weak positive reaction on a referendum in Scotland, on the basis of which it remained as a part of the UK. In addition, rumors appeared about a possible downgrade in credit ratings of France. This morning European stocks have continued to slip. The largest British grocery store chain Tesco lowered the forecast of its financial indicators for the first half of the year, and its stock tumbled 10%. This almost completely leveled the “Scottish positive data” for FTSE100. Futures on American stock indices are now traded “in a prominent downfall”. The markets had a negative reaction on the statement of the Chinese Minister of Finance Lou Jiwei about a possible slowdown of the Chinese economy. After that, the local stock index Shanghai Composite tumbled nearly 2%. Of course, the commodity futures prices also decreased. Note that tomorrow early morning Manufacturing PMI will be released in China at 1-35 СЕТ. It is calculated by HSBC bank. In our opinion, its outlook is negative, which may prolong the downtrend. Coming back to Europe, it should be said that the ECB President Mario Draghi’s speech is to be given today at 13-00 СЕТ. At 14-00 СЕТ Consumer Confidence Index for September will be reported in the Eurozone. Its forecast is neutral, but Draghi’s speech could theoretically affect the markets, and especially the euro. The European currency has greatly weakened in the past few months, due to the lower ECB interest rates. This did not help much the EU economy. Now the currency market participants expect the plans for the European Central Bank to be revealed.

Nikkei “boosted” to a seven-year high in the last three weeks. As we have mentioned earlier, the Shinzo Abe government implements the economic policy, aimed at the yen weakening, or the so-called “abenomics”, which consists in printing the money according to the US Fed example. On this background there was a strong weakening of the yen, which may promote the increased profits of Japanese exporters. An additional factor for Nikkei growth can be considered the government appeals to the Japanese pension funds to invest more money in stocks and reduce the share of bonds. However, this morning Nikkei has slightly fallen down. Softbank stocks sagged: the bank sold a part of its securities to the Chinese company Alibaba in the IPO. The next Japanese macroeconomic data will be announced only on Wednesday morning.

Most commodity futures slumped, due to a possible slowdown of the Chinese economy. Note the relatively stable gas prices, which can be caused by the increased demand as the heating season is about to start. As expected, oil price has dropped considerably since June. This goes well along with the economic sanctions against Russia because of the Ukrainian events. However, despite this decrease, according to the US Commodity Futures Trading Commission (CFTC), not only net long positions on oil are prevailing, but it has also increased 11% this week, for the second consecutive time. Probably, some investors count on trend reversal.