Investors reacted to the global economic growth forecast revised downwards

Yesterday, the world stock markets had the prices decreased. There was no important news from the U.S. and the EU. Investors reacted to the global economic growth forecast revised by the World Bank downwards. More about this can me read in the review we wrote on Wednesday.

The trading volumes on the U.S. exchanges yesterday was as same as on Tuesday – 17% below the average for three months and was 5.2 billion shares. The daily decline for the S&P500 was 0.4% the highest level of three last weeks.

The Bank of America shares (BAC) fell by 2.1%. The U.S. Department of Justice requires the compensation from it in the amount of $17 billion for violations during operating the mortgage bonds. Whereas the ВАС is ready to pay $12 billion. The negotiations are deadlocked at the moment. Recall that the bank paid a fine in the amount of $ 9.5 billion to the Federal Housing Finance Agency in March after its shares have fallen by 20%. Besides it, we note the price downfall for the U.S. airlines including Delta Airlines (DAL) and Boeing (BA) aircraft manufacturer after the negative message about Lufthansa financial performance. Previously, Delta Airlines announced the ending of its asset redemption program worth $500 million. A few major U.S. investment companies lowered recommendations on Boeing shares.

The European markets and U.S. futures indexes are in a neutral trend this morning, on anticipation of important economic data. We will see the Retail Sales for May coming out in the U.S. at 12-30 CET, as well as weekly unemployment and the export-import prices. The changes of inventories are to be announced for April at 14-00 CET. In our opinion, the preliminary forecasts are positive despite the range of the expectations on retail sales from 0.6% to 1.3%. The The ECB monthly report for the Eurozone is expected to come out at 8-00 CET will and the Industrial production at April 9-00 CET. TheForecasts are also positive for the stock market.

The USDA raised its forecast for global maize stocks in 2015 to its highest level in 15 years at 182.7 million tons in its report yesterday. The world production forecast was increased to 981.12 million tons from 979.08 million tons last month. The USDA expects the maize production in Brazil and India to increase. Forecast for red winter wheat production in the U.S. has been reduced by 2% compared to May and by 10% compared with last year’s harvest. As for the rest of American wheat varieties they also expect a significant drop in production for the current year. Nevertheless, the USDA predicts the crop growth in the world for the season 2014/2015 to 4.1 million tons due to good weather conditions in Russia, China, the European Union and India. The forecast for the U.S. soybean production was reduced by 5 million bushels to 325 million, however, the USDA believes that the demand will be fully met due to increased imports. The world soybean reserves in 2015 could reach 82.9 million tons, compared to 67.2 million tons this year. In general, we believe that the USDA report suggests a significant increase in reserves and production of cereals. However, its appearance could trigger a correction after a strong drop in prices.

The USDA raised its forecast on the global demand for cotton this year to the 4-year high at 112.3 million bales to 111.8 million bales in May. The import forecast for China has been reduced by 500 thousand bales down to 8 million due to realization of old cotton stocks that is 40% below the last year’s level. We do not exclude that, as in the case of soybean, the futures prices may rise when China ends selling the stocks.

The Oil, Brent prices increased significantly on the hostilities in Iraq, exporting 2.6 million barrels per day. An additional factor was the reduction of its stocks in the U.S. last week by 2.6 million barrels. This is more than expected (1.5-1.9 million). The OPEC has kept production at the current level of 30 million barrels a day for next six months. It was noted earlier that the increase may be only if Brent price exceeds $120 per barrel.