Market news

Goldman Sachs predicts growth in primary commodities – Goldman Sachs’ optimism about commodities is stronger than ever.

The Wall Street company expects that the commodities index will grow by 8% over the next 12 months, and not by 5%, as predicted earlier.

In a note to customers, the company’s experts said that raw materials, led by crude oil, will show the best year in the last decade.

Goldman Sachs notes concerns about the slowdown in economic growth, and interest rates in the US are currently inappropriate, and under these conditions “demand remains stable.”

The company claims that the fundamentals of oil are “more bullish than ever”, triggered by President Trump’s decision to restore economic sanctions against Iran.

GDP growth in the UK for the first quarter was confirmed at 1.2% – According to the report of the Office for National Statistical  of Great Britain (ONS) published on Friday, the value of the country’s economic growth for the first quarter remained unchanged.

According to the ONS report, in the first quarter of 2018, the UK’s GDP increased on an annualized basis by 1.2%, which coincides with a pre-determined value.

Compared with the fourth quarter of last year, GDP growth was 0.1%. This coincided with the experts’ forecasts that this value will remain unchanged.

However, the growth of business investment in the first quarter was revised downward to 2.0% on an annualized basis in comparison with the previously defined growth of 2.6%.

Analysts assumed that this figure would be revised up to a 2.4% increase.

Compared to the previous quarter, the growth in investments in the business was revised downwards to 0.2% compared to a pre-determined growth of 0.3%.

Analysts had expected that the growth in investment in the business would be adjusted to 0.2%.

The business climate in Germany improved in May – The data released on Friday showed that the IFO business climate index rose.

The IFO Research Institute said that Germany’s business climate index rose to 102.2 in May after a value of 102.1 in April.

Economists predicted that this index will rise to 102.7.

The assessment of the current situation in Germany in May rose to 106.0 in line with forecasts.

The indicator for April was revised upwards to 105.8 against the initial value of 105.7.

Germany’s business expectations index, which determines the business climate in Germany and measures the expectations of German businessmen for the next six months, fell to 98.5 this month after a value of 98.7 in April.

Analysts predicted that this figure will increase to 99.5.

The business climate index is determined on the basis of a survey of approximately 7,000 German companies in the manufacturing and construction sectors, as well as in the wholesale and retail sales sectors.

Yen Falls, U.S. Stock Futures Rise on North Korea: Markets Wrap — The yen dropped and U.S. stock futures rose after North Korea offered a measured response to President Donald Trump’s decision to cancel a summit with that country’s leader. Asian shares were mixed, and crude oil held losses.

Shares in Japan, Hong Kong and South Korea saw modest declines and were heading for weekly losses as trade tensions simmer and investors eye risks from emerging markets. Crude oil held losses after Russia’s energy minister reiterated that OPEC and its partners will discuss phasing out supply curbs when they meet next month. Turkey’s lira resumed its slump as traders weighed whether an emergency rate hike was enough to stem losses.

Geopolitics was back on the agenda with President Donald Trump’s letter to the North Korean leader Kim Jong Un, in which he blamed the “tremendous anger and open hostility” in recent statements from Pyongyang for his decision. North Korea’s government said in a statement that it was surprised at the cancellation and remained willing to meet with the U.S. at any time.

Elsewhere, the euro remained weaker, alongside the pound, as questions swirl around the Italian populist government’s economic policies and Brexit negotiations loom large over British assets.

How Investors Are Reacting to the Trump-Kim Summit Collapse — Stephen Innes has been buying gold since the news broke that U.S. President Donald Trump had canceled his planned summit with North Korean leader Kim Jong Un.

But that aside, he doesn’t seem too bothered.

“It’s a bump in the road,” Innes, the head of trading at Oanda Corp. in Singapore, said in a phone interview. “The road to prosperity offered to North Korea by the U.S., South Korea and Japan is just too tempting for North Korea to pass up. The situation will get ironed out, just not as quickly as the market may have wanted.”

North Korea said it was surprised by Trump’s decision, and that the country remains willing to meet at any time. In a statement Friday by state-run KCNA that cited Vice Foreign Minister Kim Kye Gwan, North Korea vowed to continue to pursue peace and signaled it would give Washington more time to reconsider talks.

Market reaction was muted in Asian trading Friday, with Japan’s benchmark Topix index and a regional equity gauge trading slightly lower. U.S. stocks dropped after Trump’s announcement, before paring losses to close down 0.2 percent on Thursday.

“The low-key risk-off move was about par for the course,” Innes said. A military conflict is “highly unlikely,” he said.

Here are some other investor comments.

“It’s a shame that it has been canceled as both administrations sit on the verge of something great,” said James Soutter, head of global equities at K2 Asset Management Ltd. in Melbourne. “That said, the process isn’t over, and one has to try to figure out how much brinksmanship is at play.”

Soutter said he expected selling of South Korean stocks, and that he’d look to buy them if the market overreacted. The benchmark Kospi index slid 0.3 percent as of 10:34 a.m. local time.

As for what he’s watching for next, Soutter said it’s “who will flinch first.”

“Both are playing the man, not the ball, and in such as testing each others’ limits,” Soutter said. “Trump has just shown that he won’t fold. It’s now back in Kim’s corner.”

It’s “part of the posturing and chess game,” said Kay Van-Petersen, a Singapore-based global macro strategist with Saxo Capital Markets Pte. “The summit will eventually happen — just a question of time and date. No U.S. president is going to pass on the legacy trade of a lifetime.”

China Link
“North Korea’s remarks got tougher as the ties between China and North Korea strengthened,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. in Tokyo. “So, some people in the market were skeptical about the feasibility of the U.S.-North Korea summit. Still, Trump left the door open to a summit, so this isn’t a complete break-off.”

Not Over
“I don’t think it’s all over yet,” said Heo Pil Seok, chief executive officer of Midas International Asset Management Ltd. in Seoul. “Trump seems to be testing the water by declaring the cancellation. The level of tensions on the Korean peninsula depends on the response from North Korea.”

Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte in Singapore, agreed.

“The cancellation is a major setback,” he said. “But both the U.S. and North Korea are still talking and it wouldn’t be a surprise if the Singapore summit still takes place at a later date.”

Like Innes, Chua isn’t too fussed about the news.

“Investors are becoming accustomed to the Trump volatility and decision flip-flops,” he said. “Markets should not overreact to this news.”

“The market is waking up to the fact that the historic summit between the U.S. and North Korea will not play out like a Hollywood blockbuster, but a long-running Korean drama series,” said Eli Lee, head of investment strategy at Bank of Singapore Ltd. “For now, both sides have not closed the door on an eventual meeting — I think that is key.”

No Big Deal
“This is no big deal,” said Hao Hong, chief strategist at Bocom International Holdings. “This is all within expectation. Come on, who had expected that they were really going to meet?”

The dollar strengthened, despite the escalation of tension between the US and the DPRK – The dollar rose against other major currencies in the Friday morning, and the dollar index tested level 94. The news was affected by President Trump’s cancellation of the planned summit with the leader of North Korea.

The dollar was not affected by Trump’s decision to cancel the summit on June 12, which could increase the degree of geopolitical tensions in the region.

The dollar index, which reflects the strength of the dollar against the basket of six major currencies, added 0.11% to the level of 93.83. Last Wednesday, the dollar strengthened to the high of this year at 94.10.

The White House published Trump’s letter to the leader of the DPRK, in which the US president refused to attend the summit. In recent statements by Pyongyang, Trump saw “anger and open hostility” and called the outcome unsuccessful for both North Korea and the world.

The pair USD/JPY added 0.27% to 109.54. However, the yen, which, as a rule, grows in times of market instability, has not strengthened on the news. Core inflation in Tokyo also was slightly below expectations, reaching 0.5% against the forecast 0.6%.

The pair AUD/USD dropped by 0.11% to 0.7566. Geopolitical problems put pressure on the Australian business, tied to market sentiment.

The People’s Bank of China set the benchmark rate for the yuan against the dollar at 6.3387 against 6.3816 a day earlier. The pair USD/CNY added 0.10% and traded at the level of 6.3387.

U.S. Jobless Claims Unexpectedly Increase to Seven-Week High — Filings for U.S. unemployment benefits unexpectedly rose to a seven-week high while remaining consistent with a tight job market, Labor Department figures showed Thursday.

Unemployment-benefits applications below 300,000 are generally considered consistent with a healthy labor market, and the latest tally still isn’t far from the 48-year low of 209,000 reached in April. The claims figures, which tend to be subject to swings, have been on a declining trend as a widespread shortage of qualified workers spurs employers to retain staff while offering more perks to attract new ones.

The May jobs report due next week is projected to show payrolls expanded by close to 200,000 while the unemployment rate held at April’s 3.9 percent level, which was the lowest since December 2000.

U.K. Retail Sales Bounce Back in April as Weather Warms Up — U.K. retail sales rebounded more than expected in April as the spring weather lured shoppers into stores.

Sales climbed 1.6 percent from March, compared with a median estimate of a 0.9 percent gain in a Bloomberg survey. The surge was led by fuel, household goods and clothing, according to data from the Office for National Statistics in London.

After cold weather hit sales at the start of the year, the Bank of England is looking out for a recovery in consumption as it debates when to next raise interest rates. Britons are just now emerging from a year of shrinking real incomes after the vote to leave the European Union battered the pound and stoked inflation.

The pound climbed after the report, rising 0.5 percent to $1.3409 as of 9:36 a.m. in London.

Some stores reported that the weather had made a difference in April in getting people back into the shops, the ONS said. Clothing retailer Next Plc said this month that sales surged amid warm weather and it raised its full-year profit forecast.

Longer Term
Despite the bounceback in April, the longer-term trend is more subdued. Over three months, sales gained 0.1 percent from the previous period, the ONS said. Combined sales in April and March increased 1.3 percent from a year earlier, compared with a 2.9 percent pickup a year ago.

“Over the longer-term, retail sales growth has slowed considerably, with increases in food, household goods and internet retailers being largely offset by declines across all other types of retailing,” said Rob Kent-Smith, head of national accounts at the ONS.

That trend has hurt Marks & Spencer Group Plc, the 134-year-old retail chain that’s a fixture of shopping districts, which is shutting a third of its large stores. Halfords Group Plc, the car-parts and bicycling retailer, said this week that profit probably won’t grow this year.

From a year ago, retail sales increased 1.4 percent in April. Excluding fuel, annual growth was 1.5 percent.

The BOE expects household spending to pick up, but not enough to prevent economic growth from slowing markedly in 2018. Economists and investors nevertheless see about a 50 percent chance of an interest-rate hike this year after the first increase in a decade last November.

Deutsche Bank Says It Will Cut at Least 7,000 Jobs in Revamp — Deutsche Bank AG will cut equities jobs by a quarter and reduce overall positions by at least 7,000 as chief executive officer Christian Sewing seeks to slash costs and boost profitability at the investment bank.

The reductions will take the number of jobs at the Frankfurt-based lender to well below 90,000 and lead to a restructuring charge of as much as 800 million euros ($935 million) this year, it said in a statement on Thursday. The bank also plans to reduce funds at risk and seek to further drive down expenses.

Sewing is accelerating a push to refocus the lender on its European home market and reverse a two-decade effort to compete head-to-head with the large Wall Street firms that dominate volatile securities trading. The future of the investment bank and failure of predecessor John Cryan to cut costs and restructure fast enough had been key factors in last month’s management shakeup. Global equities has been one of the new CEO’s first targets.

“The equities business is a very sensible area to focus the cuts on seeing as they haven’t been achieving the return on capital they want there,” Neil Smith, an analyst at Bankhaus Lampe who has a buy recommendation on Deutsche Bank shares, said by phone from Dusseldorf. “The key issue for Sewing to focus on immediately is cost, where Deutsche Bank disappointed last year.

The bank, which is holding its annual general meeting in Frankfurt on Thursday, is considering 10,000 job cuts, people with knowledge of the matter said on Wednesday.

Precise Forecast

The new target for job cuts is the first precise forecast given by Sewing. Cryan in late 2015 foresaw 9,000 job cuts by 2020. Group headcount actually fell by about 1,500 during Cryan’s tenure. The bank also on Thursday said it will reduce its leverage exposure in the corporate and investment bank by more than 100 billion euros as part of the overhaul and is targeting about a 10 percent post-tax return on tangible equity from 2021 onwards.

There has been increasing evidence in recent weeks that the pace of job cuts is picking up, with the investment bank bearing the brunt. Deutsche Bank has said it will move to smaller premises in New York and will close its Houston office entirely due to a withdrawal from advisory services for the oil and gas sector.

Chief Financial Officer James von Moltke hinted last month that the new CEO’s cost-cutting measures to a large extent are a continuation of plans already being developed under Cryan. The bank foresees adjusted costs not exceeding 23 billion euros this year, with that figure falling to 22 billion euros in 2019.