Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European indexes were trading lower, with the raise of the concerns about the Deutsche Bank. Yesterday in New York, the stocks of the German bank declined 6.50% after Bloomberg have reported that some hedge funds which trade derivatives and other complex financial products with Deutsche Bank have reduced their exposure to this institution. Technically, yesterday’s session from the European indices shows some warning signs. During the morning, European indices accumulated gains near 1.50% before slowly cede these valuations, coming to finish the session in negative territory. This pattern shows the nervousness prevailing in the European markets which has its origin in the Deutsche Bank situation, which in turn indicates that the initial rise of the markets was used by many investors to sell or at least to reduce their exposure to equity markets.
American indices closed lower, losing a significant portion of the gains recorded with the decision of OPEC. Although oil has managed to keep up the levels it had after the cartel’s decision announcement, American equities were shaken by the weakness of the financial sector. The weakness of the banking stocks, which spread to other sectors, originated in the news already mentioned about Deutsche Bank and the conduct of investigations that focus on Wells Fargo. This institution has been investigated after it was discovered that some employees created thousands of fake accounts. At the macroeconomic level, the session was particularly intense but the indicators assumed a secondary role. The US GDP grew by 1.40% in the 2nd quarter, surpassing the 1.20% estimated. Still, the acceleration of the economy in the 2nd quarter was lower than anticipated at the beginning, with the GDP being penalized by the sharp decline in inventories. For the quarter that ends today, the Atlanta Fed, which draws up a significant part of economic studies of the Central Bank estimates that GDP grew 2.80%. Regarding the labor market, the number of weekly claims for unemployment benefits rose by 3,000 to 254,000 in September, compared to 259 000 estimated. On the real estate market, real estate purchase and sale agreements decreased 2.40% to 108.5 in August (minimum of the last 7 months). The reading in July was revised downwards to 111.2. Inflation associated with the consumption is, excluding the most volatile assets in 1.70%, below the 2% desired. Despite this difference, for some members of the Fed 1.70% is sufficient for the reference rates not to be anchored between 0.25% and 0.50%.
Asian indices closed negative, a weakness that is explained by several reasons. The first is the continuous flow of negative news concerning Deutsche Bank and essentially penalized the German and Australian banking sectors. The second relates to the decline of oil, which had been the catalyst for the rise the day before. The third is related to the publication of inflation in Japan (which excluding the most volatile assets stood at 0.20%), still far from the 2% desired by the Bank of Japan. The fourth reason involves the intensification of the tension on the border between India and Pakistan.