Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices traded without major oscillations. In a first phase, European investors will react to the multiple results that were published before the opening. Attention will then be paid to the ECB’s meeting, the penultimate of this year, and it is expected that the ECB will reveal more details about the debt acquisition program which ends at the end of the year. With the Eurozone economy in full expansion, the ECB’s debate over the monetary stimulus has been gaining increasing debate within the ECB. Economists anticipate that the ECB will extend the purchase of assets by the autumn of 2018 but this time it will buy between 30,000 M. € and 40,000 M. € per month, compared to the current 60 000 M. €. The end of the extension of the asset purchase program is relevant as the ECB has made timing dependent on the increase in reference rates at the end of the program. In the recent press releases, the ECB stated that interest rates should remain unchanged over a long period of time, even after the end of this program. Thus, investors will monitor whether this phrase remains in the statement today. If so, then no rise is anticipated until the spring of 2019.
US markets had their worst performance since early September. This nicely describes the period of weak volatility markets are experiencing: the worst S&P performance since September 5 is a mere 0.47% drop. In a first view, we may be inclined to point out the poor results reported as a cause of yesterday’s retreat. In fact, companies from different sectors such as Boeing, Chiplote Mexican Grill (restaurants) and Advanced Micro Devices (technology) announced results that did not satisfy investors, leading to a fall in their respective shares which slightly cooled optimism over the Earnings Season. However, yesterday’s decline reminds us that stock markets do not always go up: stocks move in cycles, in waves and not in a straight line, so yesterday’s move is perfectly normal in stock markets. Today will be a day after the particularly intense closing, with the publication of the quarterly accounts of some of the top names in the technology sector: Amazon, Google and Microsoft. The shares of these companies, together with Apple, Netflix and Fcaebbok were the drivers of the strong appreciation of the Nasdaq100 in 2017 (+ 25%). Despite the gains made by these stocks in 2017 (ranging from 25% of Google to 49% of Facebook) and the apprehensions these valuations generate in terms of fundamental evaluation, in practice investors seem to remain optimistic. In fact, investors do not seem concerned about any disappointment caused by the results of any of these companies. Generally, when investors become aware of some risk related to the market or to a particular company or sector they tend to buy put options. When buying a put, the strategy becomes profitable as the index or stock depreciates. With the gains achieved with the put, the investor is compensated by the loss suffered in the shares that he holds. However, the stock volume on the Nasdaq100 and major technology stocks has been the lowest since February. This pattern becomes more relevant if one considers that the volatility of this index and these stocks is at historical lows, which makes the use of puts (whose price is partly determined by volatility) particularly “cheap” compared to the norm.
Asian markets closed without major fluctuations. On the weakness of Wall Street prevailed the prudence with respect to the meeting of the ECB. By affecting the performance of yields and the Euro, ECB decisions influence Southeast Asian yields and currencies.