Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices were rehearsing slightly higher. In this first session of the week, investors should react to the election results in Austria, with the victory of the Popular Party (conservatives). In the energy market, oil prices were trading on a rising trajectory, in the face of fears of potential new US sanctions on Iran and the political situation in Iraq. In his address to the IMF Annual Assembly, Mario Draghi argued that neither stocks nor bonds are in a speculative bubble. However, according to the President of the ECB, there are some signs of “exaggeration” in the real estate market of commercial spaces within the Eurozone. In fact, economic recovery, reduced interest rates, as well as the demand for assets with appealing returns have boosted the value and incomes of various trading venues in some parts of the Euro Zone. As far as financial markets are concerned, Mario Draghi’s words are likely to have a greater impact on the bond market than on the stock market.
American markets closed with limited gains. It is curious how a series of small advances have allowed the main American indices to reach successive records. Boosting the American markets have been the prospects that once again, American companies will be able to report higher than expected earnings. Although the sample is still small, of the S&P companies that have already reported their quarterly accounts, about 87% were able to surpass the estimates. This compares with around 75% of the last quarters. The earnings season continued with the presentation of the quarterly accounts of Bank of America and Wells Fargo. Bank of America said it had a EPS of 0.48 USD in the third quarter, compared with the 0.46 USD advanced by analysts. Revenues amounted to 22080 M.USD, with analysts forecasting an amount of 21976 M.USD. The four main business areas (asset management, consumer credit, investment banking and international banking) increased by an average of 4%. As with JP Morgan and Citigroup, Bank of America also experienced a sharp decline in bond trading revenues (-22%). Still, Bank of America shares rose 1.49%. Wells Fargo was another institution to announce its quarterly accounts, which disappointed the market, leading the respective shares to negative territory. Results for the third quarter fell by 18.60% to USD 0.84 per share, compared to USD 1.03 as well as revenues falling to USD 21900, below the forecast USD 22300. Macroeconomic data also had some impact in the course of the session. Consumer prices registered the biggest increase in September this year, putting inflation (measured in this light) at 2.20%, above the estimated 2% and 1.90% recorded in August. However, a thorough analysis shows that the price of gasoline increased by 13% due to the strong demand from hurricanes (due to the people who wanted to move away from the affected areas) and the closure of several refineries in Texas. In fact, 75% of the increase in consumer prices was due to the sharp rise in gasoline prices. If this effect is removed, core inflation reached 1.70%, below the estimated 1.80% and 2% desired by the Fed. These figures reinforce the field of advocates of a more expectant Fed position concerning interest rates. Several members of the Central Bank argue that one must wait for clear signals that inflation is increasing before rising rates again. Retail sales increased 1.60% (year-on-year) in line with forecasts. This number was somewhat adulterated by the strong sales of staples by hurricane-hit populations. Following these data, a purchase of government bonds (corresponding to a decrease in yields) was observed due to the lower inflationary outlook. The decline in yields put additional pressure on bank stocks.
Asian markets closed higher, in reaction to published economic data on the Chinese economy.