Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European equities traded with some losses. At the end of the session one should not exclude an increase in the trade volume in the various markets (equity, bond and currency), with investors positioning themselves for the referendum in Italy on Sunday. The latest polls (published on Nov 18 because of Italian law banning their disclosure in the two weeks leading up to the elections) gave an advantage of between 4% and 6% for No, although the undecided rate was high (around 25%). Since then, there has been a steep increase in Italian yields, an increase in the spread against German yields and a significant drop in the country’s banking shares. Therefore, it is possible that investors have already partially discounted a No victory. On Sunday, the presidential elections in Austria will take place. The elections in Austria and the referendum in Italy precede a year full of political events in Europe, with the elections in France, the Netherlands and Germany, in addition to Brexit. Mario Draghi said recently that “political uncertainty is a dominant factor” in the current situation and that the great unkonown is to know how this uncertainty will affect the economy of the Eurozone, however reassured investors by stating that European banks are better prepared to face Adverse events than before the crisis.
The various US indexes closed with opposite tendencies, in a session marked by economic indicators, the weakness of the technological sector and the continued appreciation of crude oil. The Dow Jones ended up higher (supported by the financial and oil sectors), while S & P and Nasdaq were penalized by the decline in technology and utilities. The publication of manufacturing activity index and construction investment exceeded estimates and indicated that the US economy continues to accelerate in the fourth quarter, reinforcing the positive outlook for investors compared to 2017 when Donald Trump’s fiscal policy will become more visible. These data caused an increase in state yields, penalizing utilities and favoring financial stocks. The technology sector was weakened by the correction of the group called FANG (Facebook, Amazon, Netflix and Google) and Apple. In addition to the uncertainty over the future of regulating the activities of these companies (Donald Trump has repeatedly accused them of having almost monopoly positions), these stocks are also being conditioned by the appreciation of the dollar. Its activity has a large exposure to foreign markets, so the appreciation of the US currency has reduced revenues generated outside the US.
Asian indices closed lower because of three factors: the weakness of the US technology sector, today’s publication of the employment report and the referendum in Italy.