Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
The good performance of the American and Asian exchanges should give an initial boost to the European markets. One of the standards of the last two months was the strong underperformance of European markets when compared to their American peers. The main European indexes corrected about 5% from the highs reached at the beginning of November, while the American markets reached successive highs and the Nikkei (after a similar correction to the European one) began a recovery that approached the peaks of the year. Bossting the European markets may have been the strength of the Euro in recent months and the absence of significant catalysts such as the tax reform in the USA or the constant purchases of shares and ETF by the Bank of Japan. This pattern was well reflected in investment decisions of American savers. In the last week in the United States, the specialized funds in US stocks registered subscriptions in the order of 7800 M.USD (the maximum of this semester), while the funds focused on Japanese stocks obtained 2000 M.USD in subscriptions. Funds specializing in European securities have received redemptions of around 2100 M.USD, the largest weekly amount observed in 2017. Redemptions and subscriptions often dictate whether fund managers decrease or increase their exposure to markets, especially at times when the liquidity they hold in the portfolio is below average.
US indexes closed with significant gains, favored by renewed signals that the tax reform should be approved before the end of the year and the maturity of futures and options. At the end of last week, was mentioned that Republicans should try to speed up passage of a harmonized text between the Senate and the House of Representatives on tax reform before the end of the year. The main reason for this urgency was the swearing in of the new Alabama senator from Republican to Democrat. With this amendment, the Republican Senate’s advantage will be reduced to 51 Senators from 49 Democrats. Also at the end of the week, news surfaced that two Republican Senators (from Florida and Tennessee) raised a number of objections to the proposed text. Therefore, there was a risk that the proposal could not achieve the necessary consensus. However, on Friday some tweets began to emerge that pointed out that these two Senators would be willing to support the proposed measures, overcoming the initial objections. Supposedly, the text drafted by Republicans is expected to be voted on in the Senate and House of Representatives later this week. This news has given a fresh boost to the market and especially to the stocks of the most focused companies in the domestic economy. In this way, the Russell 2000 index that aggregates the main small caps quoted of the country was the index that more was discharged when advancing 1.56%. Stock markets were also favored by the maturity of futures and options. Many investors use these derivative instruments to construct various types of financial market strategies, many of which are quite complex. With the expiration of futures and options, these investors have to rebuild these strategies with new derivatives due in the next quarter. This reconstruction of strategies leads to a chain of movement in the stock markets, forcing the intervention of other types of investors. This quarter, the rebuilding of these derivative strategies ended with the influx of several stock purchase orders into the market.
Asian markets closed with strong gains, reflecting Wall Street’s strong performance on Friday and the possible positive effects on Asian economies of the US tax reform. These favorable effects on local economies are in a positive macroeconomic environment. Today it was reported that Japanese exports grew 16.20% (+ 13% for the US) in November compared to the same month of 2016 (forecasts of 14.60%). Imports increased by 17%, but this was due to higher-than-average imports of natural gas for heating due to below-normal temperatures this winter. Chinese markets traded without major fluctuations after the Bank of China increased the benchmark interest rate for 14-day monetary operations by 0.05% (to 2.65%).