Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European markets traded without great oscillations. The OPEC meeting in Vienna will be held today. Until last week, the market and almost all analysts had anticipated that the cartel and Russia agreed to prolong production cuts agreed last year. This agreement combined with the growing demand justifies the strong appreciation of Brent (20%) since the last May meeting. However, in the last week some fears have arisen that this agreement might not be as easy to reach or could involve a shorter term than estimated. Another risk of the meeting is the high tension in the Persian Gulf. The situation in Syria, Qatar, Yemen as well as the change of powers in Saudi Arabia has escalated the tension between the latter country and Iran. It can not be ruled out that this tension would contaminate the process of negotiations within OPEC.
American indexes ended the day in opposite directions. While the Dow Jones and Russell 2000 (the US small caps index) closed with modest gains, the Nasdaq suffered significant losses. In fact, one of the themes of the session was intersectoral rotation. Due to rising yields and statements by the presumed future President of the Fed, Jerome Powell, who subtly defended further deregulation of the financial sector, investors rushed to buy the bank shares. However, with the liquidity of the investment funds in minima, these acquisitions would have to be financed from sales of other shares. As a result, investors sold the securities with the largest capital gains and the largest exposure: technological Stocks, namely FAANG (Facebook, Amazon, Apple, Netflix and Google). This way, these securities as well as other smaller shares that had accumulated strong gains in recent weeks were the target of intense selling pressure that lasted until the end of the session. This inter-sectoral movement relegated Janet Yellen’s intervention to Congress to second place. The President of the FED delivered a speech in line with his most recent speeches. The positive economic environment favors a gradual reduction of the FED balance sheet as well as a progressive rise in interest rates. Regarding inflation weakness, Yellen said it probably reflects transitional factors, not excluding “something more persistent” that is conditioning the price level. The US economy continues to surprise by the positive. The GDP of the third quarter was revised upwards, having increased 3.30% (compared to the 3% initially calculated), which corresponds to the largest increase in the last 3 years. The FED’s Beige Book, published yesterday and which is a detailed summary of the US economy, confirmed the positive reading of GDP.
Asian markets ended lower, penalized by weakness in the technology sector, which was plunged by the steep fall in Nasdaq. In Tokyo, the weakness of technological Stocks was more than offset by the appreciation of the banking sector. It also notes the rise in interest rates in South Korea (the first in 6 years) and the release of the PMI index in China. The PMI index for manufacturing industry in November reached 51.8 against the estimated 51.4. At the services level, PMI stood at 54.8 compared to 54.3 in October.