Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices did not show a definite trend. In fact, in the last week most of the European indices have fluctuated over a relatively narrow range. In the preceding weeks the possibility of a short-term correction was anticipated as several technical indicators had reached extreme levels not seen for several years. This correction did not materialize and the recent consolidation of the indexes contributed to a decline in these technical indicators. These indicators remain at high but not extreme levels. Technically, the DAX is trading between 12900 and 13100. A break from the top of the range would signal, from a technical point of view, a continuation of the upward trend of the last quarter. A break in the bottom of this range would increase the probabilities of a short-term correction. This week will be marked by a greater intensity of the earnings season. This morning, Dutch Philips announced a quarterly adjusted EBITDA of 532 M. €, which represents a 12% increase over the same period of 2016. This EBITDA is in line with analysts’ forecasts (531 M. €). Sales increased by 4%, mainly due to the expansion in China, but fell short (4100 M. € vs. 4230 M. €). Philips reiterated its objectives for 2017.
US markets closed with modest gains, with investors still reacting to Senate approval of the public deficit law. Senate approval of this deficit proposal has two positive consequences. The first is that without the approval of the deficit law no tax reform is possible. The second point is that under US law, after the vote on Thursday, only 51 favorable votes are necessary to approve the tax reform, instead of 60 favorable votes in the Senate (with its 100 members). Republican party depends only on its members and will not have to win the vote of any Democratic senator. Another theme of the session was the strong recovery made by General Electric after reporting disappointing results. General Electric reported a adjusted EPS of $ 0.29, well below the estimated $ 0.49. Revenues were able to surpass forecasts (32560 M.USD) by reaching 33470 M.USD. Nevertheless, the company made a profit warning, reducing its projections for the profits of 2017. The units of generation of energy and equipment and services to the petroleum industry were the main responsible for the disappointing profits. GE is a reliable sample of the global economy, by the diversity of its activities (and by its geographical exposure). However, these poor results are mainly due to company-specific factors, not signaling any problem in the global economy. GE shares have accumulated losses of 6% before launching a strong recovery that led them to a 1.10% gain at the end of the day.
Most Asian markets closed lower, with the exception of the Nikkei which saw gains of more than 1%. In Tokyo, investors reacted positively to the undisputed victory of Prime Minister Abe in the early elections held yesterday. Shinzo Abe’s party won 312 of the 465 seats in the Lower House of Parliament. By controlling more than two-thirds of this legislative body, the Prime Minister now has a greater political authority and can thus continue with a very generous fiscal policy accompanied by an ultra-accommodative monetary policy.