Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European markets traded without major fluctuations, although the London incident over the weekend had aggravated investor fears. At the same time, the geopolitical situation is also at the center of attention today as four Arab countries have severed diplomatic relations with Qatar. Thus, the price of oil and its reflection on the behavior of the shares of companies in the respective sector will be one of the themes of the day. Today, the markets of Frankfurt and Zurich will be closed, so the stock market will naturally be lower. In Europe, the week was much more hectic than in the US, with the UK elections taking place on Thursday as well as the ECB meeting. This event in the United Kingdom has become increasingly important at a time when the European political landscape has been a source of fears and uncertainty. In fact, these early elections were convened by Theresa May (the natural end of her legislature would only be foreseen for 2020), with the aim of the current Prime Minister reinforcing its parliamentary majority and, consequently, solidifying its internal position as regards Negotiations with the European Union. Concerning the ECB meeting, no changes are expected in the current monetary conditions, although there is an expectation of the statements accompanying the decision, in order to look for clues as to the future performance of the ECB.
Last Friday, US stock indexes reached new highs, although the employment report was less encouraging. The Labor Department has revealed that the US economy has created only 138,000 jobs, compared to the forecast of 180,000. The unemployment rate fell from 4.40% to 4.30%, thus reaching the lowest since 2001. Also the value of April was revised downwards from 211 000 to 174 000. In reaction, the Dollar lost value in relation to the main currencies, especially against the Euro. On the other hand, average hourly wages increased by 0.20% over the past month and by 2.50% year-on-year. This report has revealed a certain slowdown in the labor market, which may give rise to some fears about the country’s economic performance, which in the first quarter had been lower than estimated. This sign of a slowdown may influence the FED in its decision-making on monetary policy, including more prudence in normalizing interest rates. Remember that at this time, the market awaits an increase in interest rates at this month’s meeting (the probability is 94%) and is currently discounting another rise at the September meeting. It should be noted that in the first five months of the year, the economy generated an average of 162,000 jobs per month, down from 187,000 in 2016 and 250,000 in 2014, a post-recession period. In sectoral terms, the securities benefiting most from interest rate rises stood out positively and were also supported by the 10-year decline in yields from Treasury Bonds to the lowest level of the year. In the technology sector, Microsoft advanced more than 2%, favoring Nasdaq index. Broadcom’s shares also stood out in this sector. The maker of computer processors gained 8.50%, after showing results higher than expected. On the contrary, the energy sector was penalized by another fall in the price of oil.
Asian stocks ended on mixed ground. Influencing the behavior of the market was not only the fears unleashed by the terrorist attack in London over the weekend, but also the behavior of the price of oil. The price of this raw material has risen, with the worsening geopolitical situation, after some of the main countries in the Gulf region have severed diplomatic relations with Qatar. Reuters reported that the cause for Saudi Arabia to have cut off relations with Qatar was related to terrorism. Saudi Arabia has said it wants to “protect its national security from the dangers of terrorism and extremism,” while Bahrain has backed its decision accusing Doha of “undermining the country’s security and stability” and “interfering in its internal affairs.” In addition to oil, the price of natural gas has also risen, as Qatar is one of the world’s largest producers of natural gas. In China, markets traded in different directions, although the service sector index (Caixin) stood at 52.80, up from 51.50 in the previous month, revealing the fastest growth rate in the last four months.