Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European equities presented some gains. The final behavior of Wall Street on Friday, as well as the agreement reached within the EU on the new UK statute will contribute to a successful beginning of session. As mentioned in the previous article, the question that many investors raise is what will be the duration and extent of last week’s recovery. The main fear of global investors is that the US economy may come back into recession as a result of the slowdown of the global economy. Thus, besides following the signals given by economic indicators, investors will also monitor the S & P’s behavior, which will again dictate the evolution of other indexes. At this stage, this index has a resistance in the zone of 1940/1950. As long below these levels, the potential for increase in other indices seems to be limited. In the case of the DAX, resistance lies in the region of 9560. However, if S & P overcome the mentioned zone, the probability of the DAX to break the 9560 level increases, reaching the next resistance between 9900 and 10160.
US markets ended without major fluctuations, after a pressed opening due to the decline in oil price and the data on inflation. The Nasdaq could even finish with some gains. Last week, the stock indexes had the best performance this year, with some achieving gains between 2.60% and 3.90%. Oil fell 3.67% in the New York session with the evidence that the agreement reached by some producers were being welcomed by some countries such as Iran and Iraq, but without the latter to show their intention to participate. Inflation, as measured by the prices of consumers and excluding the most volatile goods, showed a strong acceleration in January, growing 0.30% from the previous month. In annual terms, inflation, excluding those goods, stood at 2.20%. Economists and the Fed generally use this measure, which is less volatile than inflation calculated based on the prices of a larger asset mix. As a whole, inflation remained unchanged in January, reaching 1.40% in annual terms. Even after this data, the currency markets continue to assign a low probability to a rise in interest rates in 2016. Contributing to the high volatility observed at the beginning of February, was the high-frequency trading, which accounted for about 49% of the volume traded on the New-York stock exchange. Placing or canceling hundreds of orders per second, these systems increase market volatility.
Asian markets closed higher, highlighting the Chinese stock markets of Shanghai and Shenzhen. Contributing to the rise in Asian equities was the good performance of western markets and the Bank of China intervention to stabilize the yuan and thus reducing fears in relation to an abrupt devaluation of the Chinese currency. In Japan, the rise in the Nikkei gained greater relevance if one considers that the yen continued to appreciate against the dollar. Since the beginning of the year, the Japanese currency (which is considered a safe haven in times of uncertainty) achieved strong gains, which, over time, can damage the competitiveness of Japanese exports.