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 defined trend. The fact that yields fail to reverse the downward trend has led to an underperformance of the banking sector, which in the past months had capitalized on investor perspectives on rising interest rates. The behavior of yields has been superimposed on the publication of results. However, in the Asian session the oil fell slightly (-0.50%). Technically, yesterday’s session may signal weakness in the coming days. Yesterday, the DAX, which is considered a benchmark for the European market, opened at the highs before gradually losing ground, ending the session very close to the lows. Added to this pattern is the fact that many short-term technical indicators are at extreme levels (after the strong valuations of the index). Therefore, it is not excluded that European markets will experience some weakness in the coming sessions (as many investors will be tempted to make capital gains). This scenario will not be valid if DAX starts trading above 13530 points.
US markets closed with contained variances. As in the previous session, merger and acquisition news was the central theme of the day. The news that Broadcom made a bid for Qualcomm and the partnership between Advanced Micro Devices and Intel to challenge Nivdia revived investor interest in mergers and acquisitions. This interest was reinforced yesterday by news that Disney would be interested in some assets of the media company 21st Century Fox (which owns Fox’s film, TV and broadcast division). With the economy expanding to 3% and with interest rates at low levels, many companies are tempted to expand through mergers. With funding rates at historically low levels, a merger or acquisition may be the fastest route for a company to increase its size and market share. The session was also marked by two notes of weakness. The first relates to the fall of 1.30% in the banking sector. This correction, which has been prolonging in recent days, is almost exclusively linked to the fall in yields in the US and Europe. One of the great catalysts of the appreciation of the US banking sector in recent months has been the prospect of rising interest rates, which would allow a greater differential between the rates that banks charge and those that they pay, which would generate a higher financial margin. Thus, the current yield decline may delay this upward movement in interest rates that many investors are waiting for. The other note of weakness was the fall of 1.26% in the Russell 2000, the index that adds small and medium-sized companies, with a strong vocation for the domestic economy. This correction is relevant in so far as it is mainly those companies which benefit from the economic proposals of the Trump Presidency, which is now celebrated precisely one year.
Asian indices had a low volatile session, ending the day with contained variations. In China, the figures for the Chinese trade balance have been published. In October, exports grew 6.90%, a rise less than the 7.20% anticipated by economists. Imports recorded a strong increase (17.20%), surpassing the estimates of 16%. These data indicate that the lower dynamism of exports vis-à-vis imports indicates that economic activity is lower in China’s main trading partners, while higher than anticipated growth indicates an acceleration of domestic demand. However, the greater than expected spread between exports and imports implies a larger trade deficit and as such a negative impact on Chinese GDP. In Seoul, before the National Assembly, President Trump gave a stern tone, warning North Korea that “underestimating or provoking the US” would be “a fatal miscalculation.” These words did not have a direct impact on the financial markets but reminded investors of the tension in the Korean peninsula.