Stock Markets – Daily Note – 12/Oct

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

In the pre-opening, the European indices did not show a definite trend. The beginning of the European session shall be dominated by factors specific to certain firms. Glencore announced that it will divest two mines, one in Chile and another in Australia, a decision which falls within the target of a 10 000 M. USD debt reduction. In the sector of foodstuffs, the Belgian-Brazilian takeover of Anheuser-Busch InBev on English SAB Miller remains the main theme. Reuters reports that the brewer AB Inbev can raise its offer for SABMiller. RWE and E.On have been the worst performers in the DAX this year (-52% and -36%) due to the uncertainty regarding the closing costs of their nuclear plants.

US markets closed with very modest gains but bear some relevance as complete the best stock market week, this year. Boosting Friday session were essentially two factors. The first factor is related to the continuation of the positive effect that the publication of the minutes of the last meeting of the Fed caused. This document revealed that the decision to keep rates unchanged was more consensual than what the market believed. The second factor is that many investors have been forced to adopt a cautious stance since the turbulence experienced in August. In fact, given the slowdown in the Chinese economy, the devaluation of the Yuan and the impact on emerging economies, many fund managers decreased their exposure to the equity market and simultaneously increased the proportion of their allocation to defensive sectors at the expense of more cyclical. Now, after the sharp rise in stock markets earlier this month, these fund managers are required to monitor the development of its benchmarks. The order to follow the upward movement of the stock markets reinforces the buying market pressure. This pattern happens even when some of the variables that most influence the stock market, such as oil, recede. Despite the correction on Friday, oil registered an appreciation of more than 8% last week, confirming the willingness of global investors for assets with a higher risk. Today, more especially in the days ahead, attention will be focused on Wall Street at the earnings season. In the long run, the variables that most influence the prices of the companies are profits and interest rates. Today is celebrated Columbus Day, with the bond market closed. Although the US stock exchanges are open, the volume should be less than usual.

Asian markets closed with significant gains, justified by strength of the Shanghai Stock Exchange.The newspaper China Securities Journal have cited a central bank member who said the correction phase of the Chinese stock market was near the end. In addition, the Chinese finance minister argued that it is not appropriate that the Fed now raise interest rates given the uncertainty that cross many emerging economies.

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