Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
European markets were testing bullish. Yesterday the DAX had a behavior that, from the technical point of view, is promising. After the lower opening, the German index accelerated this negative trend, trading below the 12900 support. However, in the afternoon, German equities underwent a strong recovery that allowed them not only to close higher but close above 12900. From a short-term technical point of view, if the DAX starts trading above 13000 the probabilities of the correction are quite reasonable. One of the factors that may condition the stock markets is the evolution of yields. Two major debt auctions will take place in Europe today. At 9:40 am, the Spanish Treasury will auction debt at 3, 5 and 10 years, for an indicative amount of 5000 M. €. In previous auctions, the yields of these maturities were respectively 0.043%, 0.36% and 1.457%. At 10:00 a.m., the French Treasury will issue debt at 3 and 5 years. In previous issues, the yields of these maturities were – 0.39% and – 0.07%.
US markets ended the session low, prolonging the recent negative series. The fall in oil prices, uncertainty over the tax reform and the weakness of key technological actions have led many institutional investors to continue to realize capital gains. As the end of the year approaches, which in terms of stock markets has been very favorable, many fund managers do not want to take risks to compromise the performance of their funds. As such, these managers are reducing their exposure to the stock markets as their benchmarks correct. In this sense, a vicious circle is formed, as the fall of the main indices induce fund managers to sell, further pressured the stock markets, which, in turn, encourage these managers to continue to sell. In the bond market, the publication of economic data, which gave important indications about the economy, was well received by the market, leading to a drop in yields. Inflation, as measured by the consumer price index, rose by 0.10% a month, corresponding to an annual increase of 2%. These changes equal the economists’ estimates. The drop in gasoline prices (-2.40%) was more than offset by higher rents, health costs and the price of used vehicles. If we exclude more volatile goods, such as gasoline, core inflation increased by 1.80%, above the 1.70% forecast but still below the 2% desired by the FED. These figures do not significantly change the outlook of investors vis-à-vis the December FED meeting, which is expected to increase 0.25% of the target rates. Economists remain optimistic about the consumption of Americans, which is expected to be sustained by inflation, the dynamism of the labor market and the valuation of family assets that contribute to the improvement of American sentiment.
Asian stocks traded mostly upwards led by the Nikkei. The Japanese index has been one of the best performers in the world in 2017. As such, it has been one of the most vulnerable to the capital gains movement, which has taken on a global dimension. Against this background and after six downturn sessions, Japanese stocks have recovered although it is premature to declare the end of the correction.