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 a clear trend. The holiday in the United States may condition a little the volume, but as European political issues will continue to dominate the attention of investors, this impact should be less than usual. In addition to the consequences of Brexit, which still remain unclear, investors are faced with uncertainty in relation to the formation of a stable coalition in Spain and the decision of the Austrian Constitutional Court to repeat the presidential elections. In fact, it was discovered several irregularities in the vote and the ballot, which justified the decision. The presidential elections were held on 22 May and resulted in a victory by a very small difference (about 30,000 votes) of the independent candidate Alexander Van der Bellen (supported by some left-wing parties) on Norbert Hofer (nationalist right). The issue is that the latter candidate has more votes at the polls but lost that advantage when the votes were counted by mail. The main issue for financial markets is that the party of Norbert Hofer, the Freedom Party, has been a staunch critic of European institutions, and some of its members advocated the holding of a referendum similar to that carried out in the UK.
The recovery of US markets continued to boost US equities. To this external catalyst are added some domestic factors. Over the past week, the S & P recovered almost all the losses in the next two sessions after the British referendum. In fact, the S & P on June 23 ended in 2113, hit a low of 1991 on Monday and ended the week in 2103. Due to the recovery of European markets (which was not as remarkable as the Americans) and before the absence, at least momentarily, visible and palpable effects of Brexit, US investors have shown an attitude something condescending in relation to this issue. This behavior in relation to European issues has been observed in the past. In previous years, US shares managed to overcome with greater or lesser effort, the events observed on the other side of the Atlantic. In fact, during the European debt crisis, US indices have shown several times resilience, or even a certain indifference to the problems that reached Europe. The ISM index, which measures manufacturing activity in the country and is one of the most used by economists tools, recorded in June a higher increase than estimated, contributing to a more reassuring vision of the economy. The ISM stood at 53.2, up from 51.3 in May and calculated the 51.4 anticipated by economists. Among the various components of this indicator highlights the positive to the new orders and employment. The component associated with inflation fell slightly. These data confirm some signs that the economy has accelerated in the 2nd quarter. However, reading this indicator loses some importance because it does not yet reflect the potential effects of Brexit. As regards the property market, investment in construction decreased by 0.80% during the month May, from an expected growth of 0.60%. At the sectoral level, stood out the oil sectors, pharmaceutical and cyclical consumption (the latter was favored by the positive reading of the ISM). Today, US markets will be closed, for the celebration of the Independence Day.
Asian indices extended the end of the rally last week, despite the uncertainty generated by the inconclusive outcome of the elections in Australia. In fact, from the results of the polls, no party can form a stable government, coming up just a phase of negotiations. Rating agencies have warned that the political deadlock is prolonged, the financial rating of Australia (which is the highest in the three largest agencies) may be revised downwards.