Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European shares traded with modest variations. The first hours of trading should be dominated by the alarming signs from China. Investors from the old continent shall observe its impact on the sectors most exposed to the Chinese economy (mining, automotive, industrial, etc.) and will monitor its reflection in the price of raw materials and the behavior of other emerging markets. After absorbing the reaction to economic data in China, markets will be marked by expectations of investors regarding the Fed’s meeting, on Wednesday and Thursday. The banking sector can be highlighted after Reuters announce that 12 of the largest European banks have agreed to indemnify institutional customers in 1885 M.USD to finalize a case involving charges of malpractice in credit default swap market.
US markets closed higher, despite the uncertainties about the future decision of the Fed regarding interest rates, the oil drop and the weakness of European markets. These factors weighed a little early in the session but later the market was able to begin a remarkable recovery, which allowed it to consolidate the gains achieved over the week, which turned out to be the week with the best performance since March this year. Despite the rise in the second part of the session, the rally did not cover all sectors or the majority of quoted shares. In fact, for every 8 shares which ended in high there were 7 which closed with devaluations. The positive highlight was the biotech sector (+ 1.15%) which offset the losses of the oil sector (-0.74%). The price of crude oil (-2.81%) was penalized by two factors. The first was the rumor that Saudi Arabia can not support the initiatives of Venezuela and Russia to boost oil prices. The second factor is the reduction of the estimate for the crude by Goldman Sachs. Analysts at investment bank estimated that in 2016 the average price of oil is 45 USD / barrel compared to 57 USD / barrel previously forecast. Goldman Sachs does not exclude, in an extreme scenario, the price of crude to retreat for 20 USD / barrel. The evolution of oil affects not only its sector but also the industrial (which in recent years has manufactured the equipment needed to meet the huge increase in production of shale oil, extracted from oil shale surfaces) and several banks that financed many oil companies. The only economic data that was published on Friday was the consumer confidence measured by the University of Michigan. The initial reading in September stood at 85.7 compared to 91.9 observed in August and the 91.2 anticipated by economists. The usefulness of this indicator is related to the extent that its correlation with the actual household consumption is not high. Just like in Europe, the Fed meeting will dominate the attention of investors in the coming days.
Asian shares closed lower, because of the economic data in China, even though the Australian market ended higher (+ 0.62%). The Chinese economy continues to give signs of weakness. In the first 9 months of 2015, investment increased 10.60%, the lowest growth in the last 15 years. This variation also fell short of the 10.11% estimated by economists. In August, industrial production grew 6.10%, less than 6.40% estimated and slightly above 6% in July. Auto sales fell 3% in August despite the various promotional campaigns. The only positive note regarding the data published during the weekend was the increase of 10.80% of retail sales, which beat forecasts of 10.50%. In short, the Chinese economy continues to slow down and the aim of achieving a GDP growth of 7% in 2015 seems to be a very difficult challenge. It is not excluded that the Chinese authorities adopt more measures to support the economy. The big unknown is whether the nature of these stimulus May be fiscal or monetary character (which would be welcomed by the equity markets) or exchange nature (a new devaluation of the Yuan) would have a negative impact on world stock markets.