Stock Markets – Daily Note – 01/Oct

Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European markets have opened higher, reflecting the good performance of the Asian and American markets. The good reaction from Asian investors to these little exciting data from China should enhance the positive feeling that yesterday cheered the European Markets. This positive response to the Chinese indicators was most enthusiastic in the equity markets than in commodity markets, as valuations of raw materials were somewhat modest. Thus, the most sensitive sectors of the Chinese economy, which coincidentally have been the most penalized in the current situation should lead the climb. Among these sectors include the industrial, mining, oil and automobile. Today auto sales will be published in the US relating to September. This data will not reflect in full the Diesel Gate but probably Volkswagen’s sales will be below estimates. The recovery from yesterday and its continuation today, may not be sufficiently compelling to calm investors as uncertainties remain (situation of the world economy and the monetary policy of the Fed).

American indices closed higher, boosted by a number of factors. Among catalysts include the recovery of the biotech industry, the valuation of oil, some technical factors and some shopping associated with the end of the quarter. The biotechnology sector has appreciated 4.80% and boosted other technology stocks. In fact, in recent sessions, in addition to macroeconomic variables, the Nasdaq has been conditioned by the developments in the mentioned sector. Still, this sector lost 17% between June and September, the first quarterly devaluation in the last 11 quarters. The fact that the S & P have finished lower in five of the last six sessions also encouraged some investors, namely, some funds that were to close their quarterly accounts. The highly anticipated speech by Janet Yellen did not deviate significantly from the general lines of other interventions, and did reduce investors’ optimism. According to ADP, the US private sector created 200,000 jobs, slightly higher than the 190,000 estimated. Unlike the pattern seen in recent months, the largest companies did contribute more significantly to the creation of jobs. As the ADP report falls significantly with estimates for Friday’s employment report (206 000), it shall not bring much change. Generally, economists leverage the ADP report statements to improve their forecasts for the official employment report. The Chicago PMI index, which measures manufacturing activity in the region, suffered an unexpected drop of 54.4 to 48.7, surprising economists who anticipated a level of 53.0. This was the fifth time in 2015 this index was below 50.0, a level that separates a phase of expansion from a contraction. The ISM index, which measures manufacturing activity at national level, have a less volatile behavior, therefore, its publication today deserve the attention of economists.

Asian markets closed higher, reacting positively to economic data in China. In September, manufacturing activity measured by the Chinese authorities increased slightly (from 49.7 to 49.8), exceeding the 49.6 estimated. The Caixin / Markit index, prepared by HSBC economists, fell to 47.2, just above the initially estimated 47.0. Some components of both indexes, such as the orders have all improved. Objectively, these data are not positive. Chinese manufacturing industry continues to be in a contraction phase, even if they just use the official index, which is generally more favorable than the calculated by HSBC. The positive reaction of investors is explained by the fact that the data are not as negative as expected and show some stability.