Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European indexes traded without major fluctuations. This week has seen a sharp appreciation of European markets, which at an early stage was based on the appreciation of the Euro. Subsequent gains were due, very likely to the need of fund managers to follow the rise of their benchmarks. The level of liquidity of the portfolios of global managers was quite high and the prevailing sentiment was neutral. This data is generally positive because it means that if general conditions improve and equity markets recover, managers have funds to allocate to these markets, although this liquidity could be used to meet the redemptions of subscribers. Despite the positive environment, the European banking sector, especially in Southern Europe, should merit the attention of investors. Yesterday in Spain, Banco Popular announced a capital increase of 2,500 M €., With the issuance of 2000 000 shares at 1.25 € (a discount of almost 40% compared to Wednesday’s closing). According to the bank, this increase is intended to cover a larger percentage of bad loans. In reaction to this capital increase, the shares of the Spanish and Italian banks recorded sharp losses. Generally, some investors tend to extrapolate the situation of a bank to other financial institutions which in their view are similar. Therefore, it is not excluded that in the short term, the Italian and Spanish banks show an under-performance compared to its sector.
US markets closed without major fluctuations. Initially, US indices traded were trading higher, reflecting the good performance of its European peers and the rise in oil prices, which yesterday surpassed the psychological barrier of 50 USD / barrel, before correcting by the end of the session. Despite being sustained in the short term by some factors such as the decrease in production in Nigeria, Venezuela and Canada (the equivalent of 4 million barrels per day), from a technical point of view the price begins to give some signs of fatigue. At the macroeconomic level, orders for durable goods rose by 3.40% in April, but when excluding aircraft orders (which constitute the largest share of this indicator, rather than an increase was a decrease of 0.80% and may signal (if this trend continues) a reduction of the investment in the near term. The weekly claims for unemployment benefits amounted last week to 268,000, confirming the positive phase of the labor market. Although the initial reaction to the publication of the minutes of the April meeting of the Fed, financial markets continue to show some skepticism in relation to a rise in June or July of interest rates. The Chairman of the Fed has been, within the executive committee, the more conciliatory with the financial markets, and the one whom have shown more prudent in relation to a change in monetary policy. Today will be held two events that fall into this scenario. The first is the GDP revision for the 1st quarter. The second event is a session of questions and answers at Harvard University where Janet Yellen will be honored with a recognition by the Commission. It is uncertain whether Janet Yellen will answer any questions regarding the timing of rising interest rates, but it is quite certain that the session will be closely monitored by investors.
Asian indices closed with contained variations, with investors waiting for the intervention of Janet Yellen at Harvard. In Japan, consumer price index (excluding some more volatile assets) has fallen 0.30%. Although this decrease was lower than estimated (-0.40%) it signals that Prime Minister Abe’s policy is not to achieving a key objective of economic policy (that is inflation of 2%).