Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In pre-opening, the European indices rehearsed without a definite trend. In Asian markets, oil was trading at near 1% gains, after China’s economic data showed that China’s demand for crude rose by about 1 million barrels a day in September. This increase eases worries over the Chinese economy that emerged in August when crude oil imports hit a 9-month low. In the debt market, an interesting pattern has emerged: despite the expectations of an increase in term yields (due to the normalization of monetary policy in the US and Europe), recent bond auctions on both sides of the Atlantic have attracted a strong buyer interest. This interest, coming from pension funds, sovereign wealth funds and insurance companies, could slow this hypothetical rise in yields that many investors expect.
US markets closed with modest losses. The beginning of the earnings season with the publication of the quarterly accounts of two of the major US banks was the mark of yesterday. JP Morgan reported a quarterly EPS of 1.76 USD (which is not comparable with the same quarter of 2016), surpassing forecasts of 1.65 USD. The financial margin amounted to 26200 M.USD, an amount higher than 25600 M.USD anticipated. The bank reported earnings growth in its major divisions (consumer credit, corporate lending and investment). The only area that countered this overall positive trend was bond trading (which fell by 27%) due to the weak volatility that marked the financial markets during the third quarter. JP Morgan shares fell 0.88%. Citigroup also hit analysts’ forecasts. The bank announced that in the 3rd quarter it reached EPS of 1.42 (+ 8% compared to the same period of 2016), against the expected 1.32 USD. Profits for the quarter include the sale of the debt research area (355 M.USD). Net interest income totaled 18,200 M.USD (+ 2%) above the projected 17860 M.USD. Citigroup’s main division, the international area, saw an increase (9%), just like the other divisions. As expected, bond trading declined 16%. Citigroup shares fell 3.40%. The only negative note of the results was that both banks increased provisions for their consumer credit, showing increased concern about this market segment. Thus, the negative reaction of investors to the good performance of both banks is explained not only by the increase in provisions (a sign of deterioration in the quality of credit granted) but also because, since the beginning of September, the banking sector has appreciated 8 % against S & P’s 4%. This overperformance is explained by the prospects of rising interest rates and less stringent financial regulation and most likely by the outlook for good results. The publication of the consumer price index will be the main event of the day. Notwithstanding the acceleration of the US economy at the beginning of the semester, inflation persists in not following this trend, remaining below the 2% desired by the Fed. The Reading of the August and September economic indicators will be tampered with by the economic effects of Hurricanes Harvey and Irma passing through the southern US.
Asian markets closed higher, with China’s economic indicators offsetting Wall Street’s weakness. In September, Chinese exports grew 8.10%, below the estimated 8.80%. Imports increased by 18.70% compared to forecasts of 13.50%. Although these numbers have a negative impact on GDP, they do not fail to signal the dynamism of the Chinese economy. When an economy is in the process of expanding, it is normal for its domestic consumption to be robust and that this translates into a greater demand for goods manufactured outside the country.