Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening of the session, European indices were trading lower. The retreat of US markets, albeit slight, should influence the sentiment of the investors of the Old Continent. In the exchange market, the appreciation of the dollar is causing the correction of several raw materials, including oil. This move should penalize oil and mining stocks. The US Department of Commerce is studying the imposition of additional tariffs on metal imports, prompting a formal protest from South Korea to the World Trade Organization. The prospect of a trade war between several countries in this sector could penalize the stocks of European metal manufacturers.
US markets closed lower, with the Dow Jones plunging. The devaluation of yesterday is essentially explained by two reasons. The first is specific to the stock market: after the strong rebound in the previous week (which materialized in 6 consecutive sessions of earnings) it was expected that there would be a retreat from American stocks. The second reason is associated with the debt market. Although 10-year yields traded below 2.90%, 2-year sovereign interest rates surpassed 2.25%, which was the highest of the last 10 years. The sharp fall in the Dow Jones is justified by the disappointing results of Walmart. Considered the largest retailer in the world, Walmart reported a adjusted EPS of 1.33 USD, which fell short of the estimated 1.37 USD. Revenues amounted to 136 300 M.USD, which exceeded forecasts of 134 900. But what displeased investors was the evolution of WalMart’s efforts to compete with Amazon in the e-commerce market. WalMart’s online business growth rate of 23% is small compared to the 40% recorded by Amazon. WalMart shares fell by 10.20%, the biggest daily drop since January 1988. Investors will assess whether the Fed has changed its perception of inflation and may change the pace of rising interest rates. With evidence that inflation is approaching the 2% desired by the Fed and the expectations of economic agents in relation to rising inflation, many investors are questioning whether the Central Bank will not raise reference rates more than 3 times recommended in early 2018. In this context, investors will monitor today’s interventions by two FED members (Philadelphia and Minneapolis district governors) as well as the publication of the minutes of the last meeting.
Asian markets ended the session with contained fluctuations. The boost from the dollar’s appreciation (which makes Asian exports more competitive) was limited by the loss of the positive momentum that had fueled Wall Street for more than a week. Gradually, the various Asian exchanges begin to renegotiate after the festivities of the new lunar year. Only the Chinese stock exchanges will be closed until the end of this week.