22.07.2014 - Geopolitical tension decreases, but remains high

U.S. stock indexes suspended growth, despite the positive corporate reporting season and neutral macroeconomic background. Lack of strength of bulls and geopolitical tensions related primarily to the deterioration of relations between Russia and the West give reason to expect a worsening in investor sentiment. Today, the course of trading may be affected by the data on the consumer price index (12:30 GMT) and home sales on the secondary market in the U.S. (14:00 GMT). Medium-term outlook remains negative.

European stocks declined yesterday on the background of worsening investor sentiment due to the fall of the Malaysian airliner in Ukraine, which according to Western experts was hit by pro-Russian separatists. Today, the EU foreign ministers will consider the possibility of strengthening sanctions against Russia, which can negatively be displayed on the EU economy. Data on factory orders in the UK (10:00 GMT) may affect the mood of the British traders. Considering the global negative sentiment, we expect further decline of European markets in the medium term.

Asian markets showed growth after declining in the previous days, which was associated with the global negative sentiment. The Japanese market opened after the long weekend and amid falling yen, which helped the bulls. In China, the government promised to support manufacturers of environmentally friendly transport, but without the participation of foreign companies. Australian market follows the world trends. Tension around Ukraine is gradually reduced due to the success of the Ukrainian army, allowing to expect the absence of further escalation of the conflict. We maintain a medium-term negative outlook for the markets in the region.

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