Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In pre-opening, European markets were trading higher, despite the fact that the technology sector in the US has also declined in the Asian stock markets. European investors will continue to react to news and political events, and as of today some of the attention is also focused on the Fed meeting in the US. In England, a meeting is scheduled between Theresa May and members of the DUP, the Democratic Unionist Party of Northern Ireland, with the aim of reaching an agreement allowing a parliamentary majority to the Conservatives. The latest news reports say that the Queen’s speech, which formally marks the beginning of the legislature by listing government priorities, will likely be postponed because of the lack of clarity about what this Executive will be. At the same time, voices in Brussels are calling for speed in this area so that the Brexit negotiations can start quickly.
Renewed pressure on the technology sector has led the North American market to negative terrain in this first session of the week. The Nasdaq Composite index posted its biggest loss since December. Feeding this behavior was the warning given by Goldman Sachs about the low volatility in titles such as Facebook, Amazon, Apple, Microsoft and Alphabet, which may be “blind” investors to risks such as cyclical movements and regulation. Apple shares fell more than 2 percent, reflecting Mizuho Securities’s recommendation from “buy” to “neutral” and after it was reported that Apple’s new iPhone models will come equipped with slower modems than the competition . On the contrary, General Electric gained 3.50%, after the company announced the end of the process of succession in the lead, with John Flannery succeeding Jeff Immelt, who will retire. The activity of FAANG – acronym for five technological actions (Facebook, Apple, Amazon, Netflix, Google) – has not changed in recent weeks to justify its recent downfall. The reason for this move is that almost all fund managers were over-exposed to these stocks. This preference generated a gap between the fundamental value of these companies and their price. So it was enough that these stocks began to lose some momentum so that the various fund managers rushed to realize capital gains. Since the beginning of the year and until the end of last week, the average earnings of these shares were 28%, causing their market capitalization to exceed that of the DAX index. Attention is now turning to the Fed meeting that is just starting today, which is expected to announce a further 0.25% increase in the benchmark interest rate. The market attributes a 95.70% probability to this scenario.
Asian markets ended on mixed ground. Despite the significant drop in technology companies in the US, Asian counterparts presented different directions. Investors are waiting for the start of the US Federal Reserve meeting.