Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European indexes traded with some losses. The first hour of trading should be conditioned by the publications of economic indicators in China. Thus, some of the sectors most exposed to this economy, such as mining, automotive, among others, may register a under-performance. Another sector that could negotiate down way is the oil. After trading above 50 USD / barrel on both sides of the Atlantic, crude has in recent hours a sharp devaluation. This downward movement is explained by the approach of the OPEC meeting tomorrow (which led some investors to profit taking), the statements of the Minister of the UAE oil (which reports that it is satisfied with the current market conditions, away so the scene of a freeze on production) and the disappointing data of the Chinese economy. The banking sector will remain highlighted. Yesterday, the news that the Atlante (italian fund described yesterday) have been forced to recapitalize the regional bank Veneto Banca for lack of interest by investors shook market sentiment towards the sector. Last week, the announcement of the capital increase by Banco Popular had cooled the positive feeling that animated the DJStoxx Banks since late April. This sector has been particularly volatile, losing 32% in the first 6 weeks of the year, has embarked on a recovery of 23% between February and March, before retreating again in April to year’s minimum levels. In early May began a new recovery that led not to distant levels of annual maximums.
US markets closed with modest losses in a session dominated by macroeconomic data. The Commerce Department revealed that household spending grew by 1% in April, the biggest monthly increase since 2009. Particularly dynamic was the purchase of cars and other durable goods (+ 2.30%). The household income grew only 0.40%, with increased wages to 0.50%. Inflation associated with household expenditure (excluding the most volatile goods) increased 0.20% in monthly terms, putting the annual rate at 1.60%, below the 2% recommended by the Fed but presenting a sustained upward trend. These data are of some importance. On one hand, show an acceleration of consumption (which has been the main engine of the economy). Despite a favorable (labor market expanding, wage growth, low interest rates and low fuel prices), the American consumer had proved reluctant to increase their consumption. Despite the increase in disposable income, many Americans had preferred lower debt before increasing spending. Now, if the April reading is confirmed in the coming months, then the GDP for the 2nd quarter will register a sharp acceleration from last quarter. Another conclusion to be drawn from the consumption data is that the rise in inflation is sustained and will tend to be closer to the 2% desired by the Fed. Although these have been the most relevant data of the day, the session was also marked by other indicators . Regarding the real estate market, a segment of the economy that has shown some strength, house prices in the 20 largest metropolitan areas of the country rose 0.85% in March from the previous month, higher than estimated by economists (0.77%). The Chicago PMI activity index reached 49.3, below the estimated 50.3, while the confidence index measured by the Conference Board stood at 92.6, below the anticipated 96.1. The importance of the Chicago PMI index is that of being a good barometer of the ISM index, which measures manufacturing activity at national level. The reading of the ISM index, which will be published today, as well as its components relating to employment and inflation should influence the decision of the Fed regarding interest rates.
Asian indexes closed lower, penalized by economic data in China. In May, the PMI index, prepared by the State and which measures manufacturing activity, stood at 50.1, slightly above the 50.0 estimated. However, the Caixin PMI index, measured by a private entity, fell from 49.4 to 49.2. The main difference between these two indicators is that the state covers a larger sample consisting mainly of large public companies and semi-state, while Caixin index is more focused on small and medium enterprises, many of them with a propensity to export. Another indicator showed that the service sector also fell in May from 53.5 to 53.1. The latter figure is somewhat disappointing in that the services are more focused on domestic demand, which in accordance with the objectives of the Beijing government, should be at the heart of the economy in the coming years. These data create some apprehension in the light of the various stimulus measures that the Chinese authorities adopted during 2015. Some Chinese media reported today that will probably be new measures to trigger a more sustained economic recovery.