Stock Markets – Daily Note – 31 Oct

Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

In the pre-opening, the European indexes rehearsed without great oscillations. Investors will continue to monitor the results being released. Earlier today, BNP Paribas and BP reported on their accounts. One factor that has supported the European stocks, especially the more cyclical ones, has been the retreat of the Euro. Technically, the main support of the European currency is located in the 1.1470 area. However, if the Euro starts trading above 1.1660, the likelihood of a short-term recovery becomes more robust. In the debt market, Mario Draghi’s conciliatory tone at the ECB meeting coupled with Standard & Poor’s rating agency’s decision to lift Italy’s rating should continue to support European bonds, especially those in southern Europe.

US markets closed with contained swings. The good results of Amazon, Google and Microsoft seem to have changed the paradigm of the current situation. If fears about the share price of these companies remained unchanged compared to the valuation of their companies for a week, yesterday’s session was similar to a return to the first half of this year. In fact, during this period, one of the most popular strategies among hedge funds was the purchase of the main technological stocks, among them the ones called FAANG (Facebook, Amazon, Apple, Netflix and Google). At yesterday’s session, while the Nasdaq continued to focus on the good results of some of its major companies, the other indexes were affected by a Bloomberg report that said that possibly the reduction of corporate tax would be gradual rather than immediate. This news (not yet confirmed) affected mainly the most focused companies in the domestic economy, represented by the Russell 2000 index, which lost 1.15%. Economic data published yesterday did not significantly change the money market outlook for the FED decision at the December meeting. During September, household consumption increased by 1%, the fastest pace since 2009, while income increased by 0.40%. The savings rate has thus decreased to the lowest since December 2007. Consumer-driven inflation, the measure preferred by the FED, reached 0.40% in September (1.60% on a yearly basis). If we exclude more volatile components, such as power and energy, this indicator rose by 0.10% (1.30% in annual terms).

Asian markets are in a narrow consolidation range. In China, it was reported that the PMI index, prepared by a state entity, reached 51.6 in October, below the estimated 52.0. The service PMI stood at 54.3, down from 55.4 in September.