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 slight gains. Favoring the market is expected to be the closure of Wall Street and some Asian markets, as well as news that the US National Hurricane Center has reported that Hurricane Harvey has lost intensity and has turned into a tropical depression. However, the political sphere and macroeconomic scenario of the Eurozone will be two important points of the session. Today is the last day of the 3rd round of talks on Brexit, with investors waiting for some statement on developments concerning this issue. The publication of inflation in the Euro Zone will be one of the central points of the day, because of the impact it has on the common currency. Economists anticipate that price levels in August accelerated from 1.30% in July to 1.40% inflation, easing pressure on the ECB to normalize its monetary policy. In exchange terms, the higher the inflation, the greater the positive impact on the Euro. On the contrary, a lower reading of inflation may lead, with all other factors being equal, to a devaluation of the common currency. However, since August has a calming effect and a consequent decrease in volumes traded, the reaction of investors to a news or event is more pronounced as it is exacerbated by the lack of liquidity. If this is the case, the reaction of the exchange market to events or the publication of economic indicators (such as inflation) will be more extreme and, by reflection, their impact on the stock markets will be greater.
The US market ended up higher, with the S&P500 recording the fourth consecutive session of gains, favored by published economic indicators. The session was somewhat volatile as a result of developments in tensions between the US and North Korea, with the focus also being on Donald Trump’s speech on tax reform. With regard to economic indicators, according to the ADP employment report, 237 000 jobs were created in the private sector during August, significantly above the 185 000 estimated by economists. On the other hand, according to data presented today by the Department of Commerce, the growth of the US economy in the second quarter was revised upwards to the fastest pace of the last two years, due to an increase in the consumption of goods and services, Including car purchases. Thus, GDP in the second quarter increased 3% year-on-year, compared to 2.60% in the previous quarter and 2.70% in the first quarter, while consumer spending, which represents a large part of the economy, increased by 3.30%, Against 3.00% Expected), the highest increase since the second quarter of 2016 and after the 2.80% previously revised. In turn, annual inflation linked to GDP slowed from 2% in the first quarter to 1.60%. Some more relevant economic indicators will be published today, including incomes and household expenses for the month of July. Economists’ forecasts point to spending accelerating over the past month from 0.10 percent in June to 0.40 percent. Also the yields will have transmitted a positive signal, since they should have increased 0.40% in July, after having not changed in the previous month. It will also be important to monitor the publication of consumer inflation, since this is the Fed’s preferred inflation measure. Estimates indicate that this indicator (excluding the most volatile goods) registered a monthly increase of 0.10%. It should be recalled that at this point the prevailing view of the Fed is that the slowdown in inflation is explained by temporary factors, although the data for the coming months will prove to be important for measuring the timing of interest rate increases.
Asian markets ended in different directions. The Dollar extended gains against the Yen, peaking in about two weeks. Investors reacted to published data on the Chinese and Japanese economies. The PMI index for manufacturing activity in China rose to 51.70 in August, surpassing the estimates of 51.30, while the same indicator for services fell to 53.40, the lowest since May Of 2016. In Japan, industrial production fell 0.80% in July from the previous month, compared to forecasts of a decrease of only 0.50%.