Commodities down as dollar approaches 3-month high

On Thursday the US dollar index, a measure of the greenback value against six currencies, was flat at 97.93, not far from its 3-month high of 98.14 after growing for 5 straight trading days (see the US dollar index historical data). The dollar is supported by the Fed Chair Janet Yellen hawkish comments on Wednesday that the policymakers leave open the possibility of the December rate hike. The U.S. payroll expected this week will increase the chances of the rate hike if the reading will be in line with the market expectations. The possibility of the rate hike is estimated at 56% now, up from 50% early this week. On Thursday the U.S. stocks were slightly declining. Valeant Pharmaceuticals stocks plunged 14.5% after the investigation on the medicines overpricing started. The earnings report from the computer chip producer Qualcomm came out negative with the company’s stocks plunging 15.3%. The same reason pushed the Biotech Celgene stocks down. Chevron and Exxon saw their stocks losing 2.3% and 1.4% respectively due to the low oil prices. The trade volume on the US stock exchanges was 4% above the 20 trading days average amounting to 7.3bln stocks. Today at 14:30 CET several indicators will be released in the US and Canada. In Canada the October unemployment rate is expected to remain unchanged at 7.1% and the September net change in employment to contract. The October month-over-month building permits are forecasted to become positive. In the US the change in non-farm payrolls for October is expected to increase significantly while the October unemployment rate to contract by 0.1% to 5.0% – the low since 2008. Among the other data are the October average hourly and weekly earnings at 14:30 CET and Baker Hughes U.S. rig count at 19:00 CET.
On Thursday the EUR/USD exchange rate reached its lowest since the end of July at $1.0834 amid the EBC hints on the possible monetary policy easing. In the UK, the British pound slid 1.2% yesterday as the British policymakers said they were not in a rush to raise the rates right after the US Fed hike because of the poor inflation expectations. The European stocks were on the rise. The Euro STOXX 50 index edged up 0.2%. The pan-European Stoxx Europe 600 index has already gained 11% since early October as markets expected the ECB would expand its monetary policy and that the monetary easing in China would help support the China’s economic growth and increase its demand on goods and commodities. DAX 30 index and CAC 40 were outperforming due to the positive corporate earnings reports. Societe Generale stocks climbed 4% on the news about its retail network expansion. The DAX 30 component Adidas stocks skyrocketed 8.6% amid the release of its better-than-expected forecast of profits and sales. On the other hand, the chemicals distributor Brenntag stocks plunged by 7.3% while the world leader in HR Adecco saw stocks slump by 10.6%. Overall European earnings reports were mixed on Thursday. Today the German industrial production for October was released, the reading being far below the expectations that pushed the European stock indices down. Richemont, the owner of Cartier and Montblanc brands, revised its second half year earnings outlook down after reporting the contracted sales in Hong Kong which resulted in its stocks falling 7%. The stocks of other luxury brands Swatch and LVMH declined 5% and 3.3% respectively. At 10:30 CET the October industrial production and September manufacturing production year over year are expected in Great Britain. At the same time the September trade balance will be released in UK.
The USD/JPY rate edged up to the 10-week high on Thursday during the trade closing a bit lower at 121.64 yen. Nikkei index is growing for the 4th consecutive day amid the yen weakening. Markets believe it makes the Japanese goods more competitive. The tractors producer Kubota stocks increased 4.9% supported by the stronger earnings outlook.
Oil prices were declining for the 2nd trading day as markets were concerned about the global supply glut. Brent oil futures for December fell to $47.98 per barrel while the WTI oil futures for December reached $45.20 per barrel.
On Thursday gold has reached a 7-week low amid the US dollar strengthening and continues to be hugely dependent on the US Fed hawkish comments. Copper has slid to the lowest in 4 weeks driven by the same factor.