Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices traded without a clear trend. Initially, European equities will react to economic data from China but later shall focus on the meeting of the Bank of England (12h00), the first since the referendum on 23 June. Since its completion the Governor Mark Carney said the economy may slow as a result of Brexit and promised action in the coming months. The intervention of the Bank of England may materialize in the form of a decline in interest rates and / or the implementation of quantitative easing measures. The big question is the timing of these interventions. Mark Carney will wait for confirmation of economic data (up to now sentiment indicators published only) or will he anticipate signs of weakening economy, announcing today some measure? Money markets assign a probability of 80% to today’s announcement of a fall in interest rates at 0.25% for 0.25%. At the moment the possibility of a more significant cut in interest rates and / or the implementation of quantitative easing measures seems less likely. It will be the reaction of the British Pound that investors will watch before taking any decision in other financial markets. A devaluation of the pound would be in the short term, favorable to equity markets, especially the English. In the medium term it is important that the English currency stabilizes (regardless of the level) because only then economic players will take their decisions.
US markets closed without major changes, with the exception of Nasdaq which closed with modest losses. Despite being positive the ability of investors to resist the temptation for profit taking, yesterday’s session hides some weakness. Some more cyclical sectors such as oil and technological suffered devaluations. Today begins the earnings season of the banking sector, with the presentation of the quarterly accounts of JP Morgan. The financial sector was among those who suffered most of the downward revisions of their earnings by analysts. Among the major banks, only Goldman Sachs is expected to report a profit growth but only because last year, which is a reference to the previous quarter, the institution had paid a large fine. As a whole, the financial sector is expected to record a decline of 4.80%, although it may report a modest increase in revenues (1.40%). The results should have been penalized by lower expectations of rising interest rates in the US, which penalizes the financial margin, ie the difference between interest rates on loans and the interest rates that banks remunerate depositors. The results should also have been negatively conditioned by lower revenues from trading and the lower performance of investment banking. For JP Morgan, which reports its results before the opening, analysts estimate an EPS of 1.44 USD.
Asian markets traded without major fluctuations. Once again, Japan was the exception to extend the recent rise, triggered by the victory of Shinzo Abe in the elections of last weekend. However in China, economic data continues to generate some apprehension. In June, exports fell 4.10% and imports% 8.40. Imports fell for the 20th consecutive month. The fall in exports indicates a lower economic activity in major Chinese trading partners, while another bending of imports indicates a slowdown in domestic demand, which so far has shown some resilience to the general slowdown in the economy.