Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European markets traded lower. The uncertainty caused by the recent news about Donald Trump has sparked renewed concern about the President’s commitment to his agenda, including the long-awaited growth measures. In fact, European markets suffer from the political turmoil in Washington in several ways, but the main ones are: a direct one, given the correlation between European and American equities and an indirect one, through the negative impact that this turbulence causes on the Dollar, So the strength of the Euro. The fact that the European currency trades for the maximum of the last 6 months may start to penalize the more cyclical actions of the Old Continent, which have driven the respective indices in recent months. The appreciation of the Euro penalizes the external competitiveness of the exporting companies of the Old Continent. In business terms, we highlight the results of Merck and Prudential.
Yesterday’s stock market indexes were under pressure: the Dow Jones and S & P 500s were the worst performers since September 2016 and the Nasdaq Composite, which has successively reached record highs, posted the biggest devaluation since June 24. The renewed political fears triggered by the news about Donald Trump penalized the market, fundamentally the banking sector. Thus, the S & P500 fell 1.80%, and the financial sector depreciated 3.10%, leading the losses of this index. The SPDR S & P Bank ETF fell nearly 4%. The VIX index, seen as a good barometer of investor fears, has risen more than 40 percent to its highest since April 21. Markets now fear that the President will be forced to contend with the controversy caused by the FBI Director’s dismissal instead of focusing on his economic agenda. Additionally, to implement the measures he promised during the election campaign, Donald Trump needs the support of some Democrats (especially in the Senate). Controversy surrounding the FBI Director and relations with Russia limits the President’s ability to attract the votes of some Democrats. There is thus the risk of a deep division between the two parties in a manner very similar to that assisted during the Obama Presidency and which has frustrated a significant part of the presidential initiatives. This risk is more serious in the light of the slowdown in the US economy in the first quarter. If that deceleration persists in the second quarter then the economy may need stimulus that the Trump Presidency may not be able to provide or will only be able to implement them next year. An intervention from the Cleveland Fed President is scheduled for today. Recalling that last week Loretta Mester defended the continuation of a gradual rise in interest rates and said that the institution could probably start taking action to reduce its balance sheet later this year.
Asian stock markets ended on negative territory in the face of mounting political uncertainties in the United States. The Dollar depreciated significantly against several currencies, having reached the minimum of the last six months against a set of some currencies. Despite OPEC’s efforts to curb overproduction, oil prices have fallen again.