Stock Markets – Daily Note – 22Mar

Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

In the pre-opening, European markets were trading lower in the face of growing fears about political and economic uncertainty in both Europe and the US. In the foreign exchange market, the Euro appreciated against the Dollar in yesterday’s session, the result of the first polls taken yesterday after the televising debate in France with some of the French presidential candidates. In addition, the Dollar devaluation was also explained by the market’s expectation regarding approval by the Trump Administration’s Health Congress on Thursday. Technically, the Euro faces resistance between 1.0825 and 1.0865. If this zone is exceeded, the next resistance is in the area of 1.0930. On the other hand, the Pound reached the maximum since 2013 against the US Dollar, after the revealed data on the evolution of prices in the country. UK inflation rose to 2.30% in February from 1.80% in January, surpassing for the first time in more than three years the target set by the Bank of England. With the season of results ending it becomes quite useful to take stock. The last quarter of 2016 (to which this earnings season refers) was the best in terms of earnings for the past 6 years. Almost all of the companies that make up the DJStoxx600 and that have already presented their quarterly accounts, about 53% exceeded the estimates. The catalysts of this time of results are several, but the most relevant should be: 1. The improvement of economic conditions in Europe and more specifically of domestic consumption. 2. The recovery of the price of oil and other raw materials that favored the respective sectors. 3. The rise in inflation that facilitated an increase in revenues. At the sector level, there was a higher percentage of profits than anticipated in the automotive and semiconductor sectors. In terms of countries, the most “virtuous” companies in this respect were the United Kingdom and Spain. In the case of the United Kingdom, the devaluation of the Pound would have been, another engine of the good performance achieved.

For the fourth consecutive session, the US market ended in a downturn, although with more pronounced losses, pressured mainly by the banking sector. The fall in this sector came from a move started after last week’s meeting of the Fed: the decline of the yield curve. The yield curve describes the relationship between the interest rate and the maturity time of the bond. By narrowing the gap between short-term and long-term interest rates, banks’ margins are reduced. On the other hand, the Nasdaq Composite reached a new intraday high, despite ending up with a 1.80% devaluation. Apple shares also hit a record high after the company announced a new version of the iPad as well as special editions of the iPhone 7 and iPhone 7 Plus. At the same time, oil prices temporarily recovered, given the possibility of an extension of the OPEC production cut. Remember that the oil sector is the worst performer since the beginning of the year, with a devaluation of 8%.

Asian markets closed lower. The Japanese market was pressured by the appreciation of the Yen and the news of any missile tests conducted by North Korea.

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