Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices have declined slightly. The banking sector will again be in focus. In the last two months, there has been a profound change in investor sentiment in this sector. At the end of the third quarter, given the uncertainties of Deutche Bank and the Italian banking system, there was a certain pessimism about the European banking sector. These factors were compounded by weak prospects for profitability as a result of the increasing and severe regulations, the low level of interest rates and the modest growth of the Euro Zone. As a result of all this, the exposure of institutional investors to the sector was the lowest in recent years. The rise in European yields and the increased risk appetite triggered by the US elections, among other factors, have altered investors’ perceptions. At a conference recently held by UBS, most investors believe that bank shares will be the best-looking investment in Europe in 2017 and the sector is the one with the highest profit-making potential. This change in sentiment was visible in the way the market responded to Unicredit’s capital increase. With a market capitalization of just over 16000 M. €, the Italian bank announced that it will increase the capital by 13000 M. €. In response, the share rose by more than 15%. Another sector that should stand out is the retailer. This morning, Inditex (Spanish) and Metro (German) reported their quarterly accounts.
US markets closed again at highs. Institutional investors are desperately trying to mimic the performance of their benchmarks. In the current phase, the Dow Jones is the most closely watched index, as several investors expect it to reach 20,000 points, which would be a historic mark and something that would deserve relevant media coverage. The Fed meeting will be the main event of the session. Although its decision is widely anticipated, today’s meeting could mark a new era in the American economy. It is almost agreed that the Fed will raise principal rates by 0.25%, so interest in this event will fall on the economic projections for 2017 and 2018. After 8 years of expansive monetary policy, it can be concluded that the Fed has reached its two goals . The economy is operating at full employment and inflation is close to 2%. From now on, it will be fiscal policy to dictate the “motto” of the American economy, and the Fed should assume a reactive and not as proactive role as in recent years. In the past, the Fed’s interest rate hikes have, in the long run, triggered a recession in the country.
Expectations regarding the Fed meeting today dominated the Asian session. This expectation translated into a prudent stance that resulted in contained fluctuations in the main indices.