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 slight losses. Despite the rise of Wall Street, European equities should be conditioned by the weakness of the Asian session and the fact that the Euro is being traded near 14.01 against the dollar. The recent weakness of the dollar, the result of uncertainty about the future of interest rates in the US, had a positive impact on oil, gold and other commodities, which could ensure an early stage over-performance in oil and mining sectors. The referendum in the UK will have an increasing role in investors’ decisions especially if the result is still uncertain. Today at 8:00 am Mario Draghi will inaugurate the Brussels Economic Forum, an event where diverse personalities of the political, economic and financial world will be present. These events are always an opportunity to sound out the feelings and perspectives of some of the key players in the current environment.
American indices closed higher, continuing to be closer to its historical highs. If the US indices break these maximum then the technical situation of medium-term (which for now is neutral / negative) will record a noticeable improvement. However, it is important to note that US stocks are being driven by secondary factors. Besides the need of fund managers being forced to follow the valuation of their benchmarks, US stocks are benefiting from the devaluation of the dollar (which increases the revenues of its multinationals), the fall in yields (which favors sensitive companies to interest fees) and oil rise. However, the most relevant variables, such as increased profits and economic growth, are giving a limited contribution. Corporate profits continue to decline, while the economy after a weak start of the year, has still not particularly convincing signs that will accelerate. In terms of specific company news, Apple announced that issued at the Taipei stock exchange (Taiwan) debt amounting 1380 M.USD (40% more than originally planned because of strong demand). Despite having high liquidity (about 220,000 M.USD), Apple issues debt outside the US for two reasons: the first is that interest rates are at low levels, and lower than the rates of return on investments that company does. The second is that the debt issued (also used for share buyback programs) is repaid with revenue that Apple generates outside the US, there is no need to repatriate them, so not paying taxes. Despite this news, shares of Apple ended lower, although its negative effect on the Nasdaq was more than offset by the rise in shares of Alphabet (Google). Among the Alphabet and Apple is running a rather curious dispute involving the “category” of the company with the largest market capitalization in the world. Apple currently leads with a reduced margin of 541,000 M.USD compared to 504,000 M.USD from Alphabet.
Asian markets ended lower, despite the good Wall Street performance. In Japan, the Nipponese shares were pressured by the appreciation of the Yen against the Dollar. In 2016, the evolution of this exchange has been the main variable influencing the Tokyo Stock Exchange. At a time when the economic and monetary policies of the Japanese authorities appear to be deadlocked, the dynamism of the economy lies in exports. However, the outlook is not favorable to the extent that some of the major trading partners of Japan, like China, are in an economic slowdown phase. In this context, the strength of the yen reduce the competitiveness of Japanese firms when they compete with American companies, European and Southeast Asian. In Korea, the Central Bank reduced interest rates by 0.25% to 1.25%, a decision that surprised economists. The positive impact of this measure on the Seoul stock exchange was measured, to the extent that investors are following the formation of a state fund that will help both banks heavily exposed to shipping companies and construction of ships passing through a particularly difficult phase.