Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European equities were trading lower and should lose some of the gains from yesterday. The banking sector will continue to be the protagonist of the European session. Until last week Italian banks had been chosen as a representative sample of the sector, but at this stage that role was taken over by Deutsche Bank. The bank’s activity has been penalized by restructuring costs and the legal costs associated with the various processes in which the bank is or was involved, the costs associated with greater regulation and also by the low levels of interest rates. In addition, investors will monitor developments in the oil and also the testimony of Janet Yellen in the Senate (15:00). The companies results that were reported before the opening should play a secondary role in determining the course of the trading session.
US markets ended without major fluctuations, but their behavior has been somewhat disappointing. Early in the session, before the recovery in Europe and the first indications reported on Janet Yellen’s speech in the House of Representatives, US equities gained between 1% and 2%. Later, due to a more cautious position of Chairman of the Fed and the inversion of the oil trend, the American indices began a long correction, which lasted until the end of the day. In a contained manner, the President of the Fed reiterated that the central bank will continue its cycle of increases in benchmark rates but acknowledged that the recent events in financial markets and China coming worrying signs represent contraction factors of economic activity in the US . Janet Yellen said that the decisions of the Fed will depend on the evolution of the economy but not entirely ruled out the possibility of a rise in interest rates in March. A note that deserved the curiosity and interest of the financial press was the possibility of the Fed adopting as in Japan and Europe, a negative interest rate on deposits that US banks have at the central bank. Oil stocks suffered the unexpected drop last week (- 754 000 barrels), contrary to the estimates of an increase of 3.17 million. Gas reserves have risen faster than expected (1.25 million barrels vs. 0.5 million). The price of oil fell 1.75%, which contrasts with the increase of around 1% of Brent, traded in Europe. The explanation for this divergence is related to the perception that the excess of supply and stock levels are higher in the US than in Europe. So in yesterday’s session, the highlight was the positive good behavior of so-called FANG (Facebook, Amazon, Netflix and Google), which was mainly due to the closure of short positions.
Today many markets that were closed in the last days (such as Seoul and Hong Kong) negotiated with heavy losses, adjusting to the movements of European and American markets which are open since the beginning of the week. The Japanese market was closed, celebrating the National Foundation Day. One reason for the recent drop in the Nikkei (in addition to the appreciation of the yen and increased risk aversion) is its high correlation with Chinese exchanges. Thus, with Chinese markets closed some global investors have sold Nipponese stocks in an attempt to obtain returns with the fragility of the Chinese economy.