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. Initially, investors (especially the British) will monitor the pound after the flash crash occurred at dawn. As stated in previous notes, the devaluation of the Pound favors multinationals in UK, but this move has to be gradual and not abrupt. Generally, abrupt movements of a currency create an environment of uncertainty that is adverse to economic agents, which tend to postpone consumption and investment decisions. Today begins the joint annual meeting of the IMF and World Bank in Washington and will continue until Sunday. Regarding the members of the Fed, investors will be alert to any reference to an increase in interest rates in December and see if any changed their personal perception of the monetary policy of the institution. Regarding the ECB, investors will see if Mario Draghi and Benoît Coeuré provide some indication of whether within this institution has raised the possibility of a reduction in the asset purchase program.
US markets closed with very contained losses. During the session, the shares were to suffer losses of around 0.50% but later recovered after Bloomberg have reported that Vitor Constâncio had refuted speculation that the ECB would reduce the asset purchase plan. At the enterprise level, the animation that had marked the last sessions of Twitter declined sharply yesterday when rumors circulated that either Apple or Google would not be interested in acquiring the company. The shares of Twitter fell 20%. Walmart yesterday held its Investor Day, which reiterated its modest profits projections for this year and the coming years. Although the company continues to decrease investment, particularly as regards the opening of new stores, investment in e-commerce should be intensified. Walmart shares fell 3.22%. This past week, some members of the Fed have come to emphasize that if the economic situation remains, there will be conditions for a rise in interest rates in December. After the readings somewhat contradictory on the economic indicators in August, the first data for September have described a US economy expanding. Therefore, the publication of today’s employment report assumes its traditional importance, in that it is the most important variable in the conduct of monetary policy and will represent a test of the positive signs revealed by other indicators. The change in wages will also be closely scrutinized because it is one of the main sources of inflation.
Asian markets ended with contained fluctuations. The main event of the session was the abrupt fall of the pound against the dollar (6%). A drop of 6% in the forex market is, in general terms, a drop of about 20% a stock index. The reasons for this move are unclear but apparently are not of a fundamental nature and can be an error, of an automatic trading program that triggered a series of stops in a low liquidity environment.