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 major fluctuations. Investors will follow the news and rumors relating to Deutsche Bank. Yesterday on Wall Street, the stocks of the German bank corrected 0.84% in the regular session and more 1.39% after-hours. According to several news sources, the CEO of the bank, John Cryan, will travel to Washington and personally conduct negotiations with the US Department of Justice. In the past, several financial institutions have reached pre-judicial arrangements with the US authorities, paying a lower fine than initially proposed. However, some investors fear that before the presidential elections approach the position of the US Department of Justice is less conciliatory than in the past. A fine between 3100 M.USD and 5700 M.USD would have an impact on bank profitability but would not affect significantly the position of its capital. The London Stock Exchange shall be affected, as the other Stock Exchanges, by the news of the Deutsche Bank but also the behavior of the British pound. Given a date for the evocation of article 50 of the Lisbon Treaty (which formalizes the beginning of the exit process from the UK EU), the British pound recorded sharp losses during yesterday’s session, with investors fearing the effects of Brexit in the British economy. However, the weakness of the pound favors the largest companies listed on the London Stock Exchange. This pattern is explained by the strong exposure that the companies in the FTSE-100 have in external economies. In fact, only 25% of the revenue generated by these companies originates in the UK. If we consider that the Brexit will have an impact on European economies, an equally curious conclusion is that the British companies belonging to the FTSE100, are the ones that have a lower joint exposure in the UK and Europe. About 58% of the revenues of these British companies are generated outside Europe (U.K. and the 27 EU countries) compared to 42% of the German listed companies, 38% of French and 40% of Italian.
US markets closed with some losses. After the rally on Friday, originated by the rumor of an agreement between Deutsche Bank and the US authorities, US investors have had difficulty finding new catalysts to extend the rise. In addition to the rumor regarding the Deutsche Bank have proved unfounded, oil rise did not have a great impact on the market as a whole. Economic data also had limited consequences on the session course. The ISM reached 51.5 after 49.4 observed in August. This recovery has been founded in the increase of components related to new orders and production. The recovery of the job component was less pronounced (from 48.3 to 49.7), maintaining a contraction phase. The ISM prices component remained unchanged at 53.0. Investment in construction fell 0.70% in July. Today, attention will be focused on the behavior of the shares of Deutsche Bank and the intervention of two members of the Fed, the Governors of the Federal Reserve of Richmond and Chicago.
Asian markets closed higher in a session marked by little news. The Reserve Bank of Australia kept interest rates at 1.50% preferring to wait for the effects of previous cuts before taking further action. The Chinese markets were closed, celebrating the Golden Week. This is the second period of seven days of holidays during which a significant part of economic activity is reduced.