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 slightly lower. Geopolitical issues and the strength of the Euro should be the main constraints of the session. Yesterday, the Euro registered a strong appreciation after President Trump had alluded that the Dollar would be becoming “excessively strong”. Today, at the end of the session, some selling pressure can not be ruled out as many investors will not want to have high exposure to the market on the eve of a 4-day stint on European stock markets and the high geopolitical risk. Short-term investors will be able to sell shares directly, while long-term investors may resort to buying puts. When buying these types of options, investors generate selling pressure because usually those who sell the options are market makers. By selling the puts to long-term investors, market makers are exposed to a downturn in the market as long as stock indexes retreat, the options they have sold increase in value. Thus, to eliminate this risk, the market makers sell the shares that constitute the shareholder indices. It should be noted that the Stockholm Stock Exchange will close at 12 noon.
US indices closed lower because of the high geopolitical risk and uncertainty that still lingers over the Trump Administration’s economic policy. Visiting Moscow, Secretary of State Rex Tillerson acknowledged that diplomatic relations between the US and Russia are at a very low level, complicating the design of a resolution for the Syrian situation. This lack of definition has led to assets such as gold and American state bonds continuing to be purchased. Another factor that weighed on investor sentiment was President Trump’s intention to re-enact to Congress the health care bill that would replace Obamacare. Today begins the earnings season of the banking sector, with the publication of the quarterly accounts of JP Morgan, Wells Fargo and Citigroup. Analysts estimate that the banking sector saw a 12% increase in first quarter profits compared to the same period in 2016. In addition, there was an increase in bad credit loans in auto loans and credit cards. In fact, from November 7 to March 1, the US financial sector appreciated by 32% and was the main driver of the S & P rise during this period.
Geopolitical uncertainty (especially that related to the Korean Peninsula) continued to weigh on Asian markets. Although not the central theme of the current situation, it should be noted that Chinese exports increased by 20.30% in March, up from an estimated 15.50%. In turn, imports grew by 16.40% compared to forecasts of only 4.30%. Although these variations may still have been influenced by seasonal factors are important signs of strength that the Chinese economy is giving.