Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, the European indices continued to rise, reflecting the positive developments in trade relations between the US and China. However, the activity of European markets will be less than usual due to the celebration of Pentecost Day in mostly Protestant countries like Germany and Switzerland. Even so, an initial positive reaction is likely from the sectors most prone to exports (especially to China) such as the automobile, mining, industrial, and others. After this reaction, European investors will focus on two interrelated themes: sovereign yields and the evolution of the political situation in Italy. In this country, the agreement between the 5 Stelle Movement and the Lega Nord continues to move forward and the name of the Prime Minister, which has been the main point of disagreement between the two parties, has been already mentioned (but not yet officially confirmed). The name that emerged over the weekend is Giuseppe Conte, a renowned academic and jurist in his midst but little known by public opinion and without any political experience. Now, the next step will be the appointment of the Minister of Finance, a key player in the current economic climate. Once the Government is formed, the financial markets will monitor their first steps, in particular as regards economic policy and relations with the European Union.
US indices closed at modest losses. With the start of trade talks between the US and China, investors’ attention was divided between this process and the evolution of yields. The first theme was the scene of several rumors and denials. In debt markets, there were some bond purchases (mostly from more conservative investors such as pension funds and insurers) that led to a decline in yields across all maturities after 10 years 3.12%. In a first phase, investors on Wall Street are expected to react today to advances made by the US and China to avoid a trade war. Subsequently, investors will redirect their focus to the bond market and the evolution of oil. By the beginning of May, oil company stocks had shown a remarkable underperformance against oil. However, in recent weeks, the appreciation of crude, coupled with a process of convergence between prices of this commodity and oil company stocks, has led this sector to strong gains, which sustained the S&P.
Asian markets closed with slight gains, reflecting the progress in the China-US trade negotiations made over the weekend. After arduous talks, the two countries agreed to substantially reduce imbalances in trade relations between the two economies. However, despite strong US pressures, this understanding does not refer to a specific figure on the decline in trade imbalances between the two countries. China commits itself to increase the purchase of American goods and services. The US trade deficit with China stands at close to 335,000 M.USD (having further increased this year) and has been strongly criticized by the Trump Administration.