Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European equities showed a slightly positive trend. Investors will continue to try to gauge the president’s degree of moderation, as well as find out more details about his policy, trying to anticipate the impact of his measures on the markets. In this context, the investor approach has been optimistic over the last two days, focusing on the more positive side of the new President’s possible measures. With the renegotiation of trade agreements and the lifting of customs barriers a more complex and time-consuming legislative process, investors seem to focus more on the new President’s intention to reduce taxes, reduce regulation in a number of sectors and outline an ambitious infrastructure plan Structures. In general, these measures would have a positive impact on the economy and profits of various companies, which explains the strong rise of some sectors in Europe and the US. The interpretation of the bond market seems to be the same. US yields continue to rise with the prospect that such measures will increase public spending and inflation. Given the high uncertainty regarding the details of the new Presidency’s economic policy, markets should remain volatile. In the short term, the notable rise in stock markets over the last 48 hours seems likely to rebound.
The trend of the various American indexes was dictated by the performance of its sectors. While the Dow Jones hit a new all-time high, the Nasdaq100 suffered sharp losses. Investors continue to try to anticipate which sectors should benefit or be penalized by the economic policy of the new Presidency. As a result, Construction and Producer Manufacturing stocks gave a strong boost to the Dow Jones, reflecting the expectation of the infrastructure plan that the new administration is expected to implement. The rise in yields favored banks as this increase allows to widen the gap between the interest rates that banks charge and the interest rates on which they pay deposits. The banking sector was further boosted by the evidence that the new President will override some of the regulations passed in recent years. On the other hand, the rise in yields penalized utilities. Nasdaq was penalized for the weakness of so-called FANGs (Facebook, Amazon, Netflix and Google). During his candidacy, Donald Trump accused Amazon of having a dominant position in its sector and of taking anti-competitive measures. The oil sector may also be a major beneficiary of the new presidency’s economic policy, but the fall in oil (fueled by the dollar’s strength and growing signs of division within OPEC) has limited its earning potential. Today is celebrated Veterans Day (in honor of all the Americans who served the Armed Forces in all conflicts), with the bond market being closed. When the debt market is closed the stock market volume is generally below average.
With the exception of the Nikkei, most Asian indexes closed lower. The appreciation of the dollar (due to the rise in US yields and less nervousness than anticipated in connection with the Trump election) may on one hand stimulate exports in the region but on the other penalizes companies and banks that have contracted loans in dollars.