Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European stocks presented modest gains. The main question this week is to know what will be the extent of the recovery of equity markets after the most recent sessions. From a technical point of view, there are some evidences that increase the probability of a recovery and this scenario gains a greater solidity with oil recovery and also the stability of the Yuan. The increase of the volume traded in the positive sessions (on both sides of the Atlantic) seems to indicate that the rise in stock market indices is not only driven by the closing of selling positions. Regarding the potential of the ongoing recovery, this will depend on the behavior of oil and Chinese financial markets. From a technical point of view, and considering the DAX as a sample of European markets, the first obstacle relevant to the rise of the German index is located in the zone of 10170-10270. The recovery is expected to be much more volatile than in the last years. It is not excluded that this upward movement is interrupted by negative sessions, in which may occur sharp devaluations.
US markets had a very positive session, with the major US indices achieving gains of more than 2%. The main catalyst was the decision of the Bank of Japan to reduce the interest rate to be used to remunerate the deposits of Nipponese banks to – 0.10%, which surprised the financial markets. As mentioned in Friday note, this measure indicates that at this point only the Fed is in a normalization phase of monetary policy to a less accommodative stance. Therefore, the liquidity that the Fed withdraws its economy may be offset by measures of other relevant central banks and the ECB, the Bank of Japan and also the Bank of China. Oil also contributed to the rise in stock markets with a valuation of 1.20%. The session was very volatile and susceptible to rumors. Economic data took a secondary role but did not lose its usefulness in gauging the current climate. The US economy grew 0.70% in the last quarter of 2015 from the previous quarter, less than estimated (0.80%) and less than 2% achieved in the 3rd quarter. Affecting the economy weighed the decrease in inventories (corresponding to 0.45% of GDP), the decline in exports (due to dollar strength), the breakdown of the oil industry investments and mild weather during the months of November and December. The latter led to lower sales of winter clothing and a lower consumption of energy for heating. Despite these factors, private consumption (which accounts for almost 70% of the economy) grew 2.20% in the 4th quarter, more than the 1.80% estimated. In short, the growth of the US economy during the 4th quarter was not as anemic as a first reading can mislead because some factors that conditioned were of a temporary nature. In annual terms, US GDP increased by 2% in 2014. The Chicago PMI index, which measures manufacturing activity in the region, showed a surprising increase in December reaching 55.6, well above the estimated 45.3 and 42.9 seen in November. Consumer confidence, as measured by the University of Michigan, stood at 92.0 in January, below the 93.0 anticipated by economists.
The Asian session was marked by two standards. The first was the rise in most indexes, still reflecting the Bank of Japan’s decision. The second marked the Shanghai and Hong stock exchanges and was influenced by the release of the PMI index for the Chinese manufacturing industry which in January fell to 49.4 from the previous 49.7 in December and compares with the estimated 49.6.