Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
The European indices started the session trading lower, following Wall Street’s retreat. Initially, we may see some selling pressure in the oil sector as a result of the losses accumulated by the crude in recent sessions. In addition, investors should also take into consideration some results that were published before the opening. Then a decrease in volume shall occur due to the expectation surrounding the ECB meeting today, which is taking place in Valetta (Malta) and is expected to be the main event of the day. Investors will try to find in the words of Mario Draghi the confirmation that the ECB will be available to adopt new measures of monetary stimulus. The implementation of the quantitative easing program had the merit of helping the economic recovery (GDP of the eurozone increased by 1.50% in Q2 and in Q3 to have grown 1.60%). However, regarding the level of inflation, the Central Bank’s merits are smaller. Inflation fell 0.10% in September and even considering the core inflation (which excludes the most volatile goods such as fuel and food) the increase was 0.90%, below the 2% desired. At this stage, 80% of economists estimated the adoption of new measures in the coming months. A fear that may emerge from within the ECB’s is on the recent strength of the Euro. Since March, when the ECB started its bond repurchase program, the Euro appreciated by 8% against the dollar and 5% against major currencies. At a time when inflation is slightly above 0%, an appreciation of the euro would be an additional pressure on the price level to the extent that the price of imported goods would actually be lower, and in particular oil and metals, Raw Materials much needed by the European industry. So Mario Draghi may use the press conference to try to halt the rise of the Euro, since in the past he has always been successful.
The US market closed lower, as a result of the fall of some biotech and oil shares. The sharp drop in shares of Valeant Pharmaceuticals (-19.17%), one of the biotech sector symbols conditioned not only this sector as the Nasdaq as a whole. The oil sector was penalized by the oil drop, justified by the greater increase than estimated (8 million barrels compared to 3.4 million estimated), which led oil at close to 2.50% devaluations. At a time when many investors are concerned by the state of the global economy, the results of Caterpillar and 3M assume greater importance. Caterpillar has exposure to several countries and provides industrial equipment to multiple sectors. For its part, 3M is a holding company that sells about 55,000 products (from electrical cables to post its) in 65 countries. Technically, the S & P closed below 2020 (an important support) thereby increasing the probability of a short term correction. Given the weakness of oil and biotechnology sector (two of the main drivers of this month’s rally in the equity markets) the coming days may deserve the attention of investors. Still, investor sentiment is positive as well as the underlying trend of the stock markets.
The Asian session was marked by the lack of news and events. In Japan, there has been some profit taking after yesterday’s rise. In China, local shares traded with contained gains, highlighting the positive behavior of some small caps.