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 with gains. This first day of the week should be essentially marked by the political sphere, in the absence of economic indicators and relevant business news. Indeed, today’s agenda includes a visit to Brussels by British Secretary David Davis to start negotiations on Brexit. The meeting comes about a year after the referendum in the UK and two weeks after Theresa May and the Conservative Party lost their majority in Parliament, adding more uncertainty to the country’s political landscape. In the currency market, the behavior of Libra will continue to be monitored. In France, the party of the French president, Emmanuel Macron, won the legislative elections with absolute majority. According to the most recent data, the party “The Republic in March” has already won 303 seats, which exceeds 289 necessary to guarantee an absolute majority. Meanwhile, an incident was reported in London this morning, in which a van ran over several people at a mosque in Finsbury Park. This news could condition investor sentiment as it again accentuates geopolitical fears.
Last Friday, the US market closed in different directions, albeit with variations contained. The Dow Jones and S & P500 indexes ended up higher, while the Nasdaq closed with a loss of 0.22%. Amazon announced the purchase of Whole Foods for 13700 M.USD, driving the shares to valuations of 2.40% and 29%, respectively. On the contrary, other companies in the retail sector, such as Wal-Mart, Target, Costco and Kroger, were penalized by this announcement. A major standard that characterized the session as well as the week as a whole was the intersectoral rotation between the various constituents of the S & P500. Last week saw the sale of technology shares and those associated with consumption and the simultaneous purchase of oil and financial shares. Technological companies, especially those with the largest capitalization (Amazon, Apple, Google, etc.), posted strong increases this year, pushing prices down from the fundamental value of their respective companies. In addition, these bonds were preferred by fund managers and hedge funds during the early months of 2017, leading to the exposure of these investors’ portfolios to strong exposure to Nasdaq and its major companies. When the market has a high exposure to a stock or sector, a slight retreat is enough for investors to rush to make capital gains, accelerating the downward movement, which in turn convinces more investors to sell. The consumer sector was shaken by yet another series of economic indicators that fell short of what was expected. Data on the real estate market during May seem to reflect a return to a less positive performance in the sector: homes under construction fell for the third consecutive month (5.50%) and building permits decreased 4.90%. In turn, the consumer confidence index, calculated by the University of Michigan, fell sharply, falling from 97.1 to 94.5, contrary to expectations of stabilization. These data compromise investors’ expectations that the US economy would recover after a disappointing quarter and demonstrates that the Donald Trump effect on the economy and above all on sentiment indicators of economic agents has been dissipating. The financial and oil sectors have once again overperformed as investors re-normalize their exposure to these stocks after the recent decline. However, the financial sector’s upside potential is limited while yields are declining and those of the oil sector while crude oil is trading under pressure.
Asian stock markets ended on a positive note as attention turned once again to the European political landscape, including the negotiations on Brexit.