Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening European markets traded with some gains. In the first hour of trading, investors will react to the Bank of Japan’s decision and some companies’ results. The Bank of Japan held its meeting and kept unchanged the general lines of monetary policy, contrary to some expectations of investors awaiting the expansion of the debt purchase program to compensate the slowdown in the Japanese economy. At a time when there are still a number of uncertainties it is sufficient, as noted last week that a central bank to inject more liquidity in an economy where liquidity is already abundant to trigger a rally in risk assets. The actions of the central banks can offset some weaker points of Europe as the modest growth of the economy, low inflation and not very exciting business results. From the components of the DJ SToxx600 who reported their quarterly accounts, 63% beat estimates in terms of profits but only 48% were able to do it for revenues.
The American market closed without major fluctuations. The statement from the Fed lead investors to focus again on major economic issues. The US economy suffered a sharp slowdown in Q3 to grow only 1.50%, significantly less than the 3.90% observed in the previous quarter. Estimates of economists pointed to an increase of 1.60%. However, this variation is less serious than it appears. The economic slowdown was mainly due to the sharp fall in inventories (almost 50%). This effect is equivalent to about 1.44% of the economy. This is likely to be temporary in that, depleted inventories will need to be replenish in the coming months, thus making a positive contribution to GDP. In addition, domestic consumption (which accounts for almost 70% of GDP) increased by 3.20% (compared to 3.60% calculated in the previous quarter). The investment was pressured by the fall recorded in the oil and mining sector. The strength of the dollar has penalized exports but as it witnessed a decline in imports, the impact of trade balance in GDP turned out to be virtually neutral. The drop in fuel price and the strength of the dollar led to an increase of only 1.20% inflation in Q3. In terms of monetary policy, GDP figure confirms the view the Fed that the economy is expanding at a moderate pace. Whereas inventories will be replenished in the coming months and that will have a positive impact on GDP, today’s number, at least theoretically, it reinforces the scenario of an increase in interest rates at the December meeting. The statement from the Fed yesterday’s meeting forced investors to reassess their expectations for the next meeting in December. The publication of inflation associated with consumption may provide some evidence in relation to the issue of interest rate. This is the preferred measure of the Fed (especially in its core version, which excludes the most volatile goods) and remains away from the 2% recommended by the Commission. The Department of Employment announced that applications for unemployment benefits remained virtually unchanged last week: this indicator increased only in a thousand jobs to 260,000, against 265,000 estimated.
Asian markets did not share a uniform trend. The initial reaction of Nikkei was negative but subsequently recovered.