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. Before the meeting of the Fed (Tuesday and Wednesday), the attention of investors will be focused on the evolution of crude oil and commodity prices. Broken the barrier of 37 USD / barrel for oil prices, the selling pressure on the equity markets intensified as previously projected, since it stimulated more short selling in oil, mining and industrial sectors. However, the selling positions either in oil or in these sectors is reaching very high levels, which may feed a short-term technical rebound, as these investors may suddenly quit their positions, thus fueling the upward motion.
US markets closed with significant losses, accentuating the previous week’s fall (which for the S & P was the worst since August). The escalation of the downward trend of oil was the main cause of Wall Street’s weakness. In Nymex (New York Mercantile Exchange), the oil retreated 3.10% in consequence of OPEC’s decision to formalize the daily production to 31.5 million barrels. With oil trading in New York at 35.62 USD / barrel, the situation of several American Shale Oil companies, may become unsustainable. Furthermore, investors continue to analyze the consequences of the merger between Dupont and Dow Chemical, and the first reaction was not positive (Dupont lost lost 5.51 and Dow Chemical lost 2.80%). At the macroeconomic level, in November, retail sales increased 0.20%, below 0.3% estimated. However, this modest change does not signal a weakness in consumption. The lower growth than expected is due to lower spending on fuel, due to the fuel price drop. The savings caused by lower spending on fuel was channeled to other goods. In fact, when excluding the most volatile goods, retail sales increased 0.60% compared to 0.40% estimated. Sales of some items such as clothing recorded increases above the average (+ 0.80%), which could be a positive sign for the current shopping season, as this type of goods figure among the ones offered at Christmas. Retail sales are a good barometer of consumption, which accounts for about 68% of US GDP. The correlation between consumer confidence and household consumption is not so relevant. In its preliminary calculations, the University of Michigan revealed that confidence rose from 91.3 to 91.8, beating forecasts of 91.0.
Asian markets closed with heavy losses, with the exception of the Shanghai Stock Exchange. Japanese, Australian and Korean equities were influenced mainly by the Wall Street decline, and the Sydney stock exchange traded near the minimum of the year. The Australian economy and by reflection its stock market is very dependent on the price of raw materials as the country is one of its world’s largest producers. The Shanghai Stock Exchange closed higher after the government in Beijing announced it will change the way the Yuan negotiates. So far, the Chinese currency was fixed to the evolution of the dollar, but from now on is going to depend on the performance of a wider basket of currencies, with a higher weight to Asian currencies.