Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European shares traded lower, as a result of the fall of Asian stocks and the publication of the employment report in the US could instill some caution in European investors. The impetus given yesterday by the words of Mario Draghi to the European equity markets, which signaled the possibility to increase and extend the debt purchase program, it risks being temporary. Because of the August events in China and also in emerging markets, the fears of investors fell in the situation of the global economy (and especially the impact of China on the recovery of the Euro Zone) and more recently in future steps of the Fed. These are two themes in that the power of the ECB’s influence is quite limited.
US markets closed with modest gains. Initially, the stability observed in the Asian session and the strong gains in European stocks boosted US equities. However, subsequently, the initial enthusiasm has given way to greater caution. This caution is explained by the publication of today’s employment report. Furthermore, the impact of a possible increase and / or extension of the ECB debt purchase program should have a contained impact either in the economy or in US equity markets. Influencing investor sentiment was also the pull back in price of oil (which affects not only the oil shares such as industrial stocks), which after reaching 4% gains, ended the day to value-just over 1%. The session was also marked by the publication of economic data, which are of secondary importance compared to the employment report to be released today, which is the main focus of investors. In fact, this will be the last employment report before the meeting of the Central Bank of September and should influence the decision regarding the timing of the first hike in interest rates. After the recent turbulence and unusual volatility, the Fed is faced with the dilemma of the possible need to increase interest rates and the desire to further unsettle financial markets. The reaction of investors to the employment report is generally quite sharp but usually at the end of the session prices end with quite restrained changes from the previous day’s closing. In today’s session is not excluded that some investors reduce their exposure to equity markets before the long weekend (the US stock market will be closed), considering that the Chinese markets will trade on Monday.
Asian markets closed lower, despite the Chinese stock markets have been closed due to celebrations of the 70th anniversary of the liberation of the country from Japanese occupation. The posture of Asian investors can be explained by prudence in relation to the employment report in the US. With China’s economy to slow down the importance of US exports to Japan and Southeast Asia is strengthened. If the US economy confirm the dynamism of signals given in the 2nd quarter, the US may be a compensation element of Chinese slowdown in Asian economies. But this requires that the US labor market continues to expand, in order to boost consumption and therefore increase demand for Asian products.