Dax 30; Ftse 100; SP 500 - Market View

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In the pre-opening, the European indices traded with contained variations. Although the sentiment is relatively neutral, signals from the debt market are somewhat worrisome. German bond yields were trading above 0.60%, prolonging the rise initiated after the break of the 0.50% technical barrier. Now, institutional investors are carefully monitoring Italian 10-year yields, which trade today at 2.29%.

 

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The effects of Janet Yellen’s words continued until the opening of the European session, which was moderately positive. If European equities could continue to benefit from the greater risk appetite of investors, this effect seems to have faded in the debt market. Following yesterday’s intervention by Janet Yellen, European bond yields, as well as their US counterparts, fell back. However, a part of this retreat was lost in the first minutes of today’s session. While German yields remain at levels above 0.50%, investors will continue to monitor, with concern, the behavior of interest rates in Europe.

 

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In the pre-opening, the indices of the Old Continent did not show a definite trend. Today's session should be divided into two parts. The first, in the morning, should be characterized by some tranquility with investors following the trend of state yields. The second part of the session will begin with the publication of the results of US banks and the spread of inflation in the US. The latter figure is expected to have an impact on European yields and consequently on the stocks of the Old Continent. Debt markets are highly interdependent, so an increase in yields in the US (if the consumer price index indicates higher inflation) will have an impact on European debt interest rates, which in turn will have an impact stocks in this region. The evolution of yields, more precisely, the differential between US and European interest rates, has been one of the variables that has conditioned the Euro / Dollar exchange rate. In recent weeks, the Euro has appreciated not only against the Dollar, which began to weigh on the European export sector. Today, it was reported that sales in Europe grew only 2.10% in June (compared to June 2016). The country with the highest growth was Italy, which contrasts with the falls in Germany and the United Kingdom. In the latter country, uncertainty over Brexit and the devaluation of Libra (which makes imported vehicles more expensive) has inhibited buyers. The strongest brands were Toyota (+ 13% of sales) and Fiat (+ 7.90%).

 

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In the pre-opening, the European indices traded with some gains. In an early stage, the good performance of Wall Street should boost European markets. However, this momentum should be limited by the strength of the Euro. At a time when the Euro appreciates sharply against the US dollar, European markets tend to underperformance with their US counterparts. Despite the dynamism of domestic consumption and investment, European companies continue to have high exposure to external markets. In these economies, many of them going through a less dynamic phase (such as China and on a larger scale to Brazil), the companies of the Old Continent face strong competition from American and Asian companies. The strength of the Euro exacerbates the competitiveness of these companies and also decreases the value of revenues and profits generated there.

 

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European markets closed lower due to the behavior of the Euro against the Dollar and some business results. In fact, the Euro reached the maximum since May 2016 against the US Dollar, which harmed the European export sector, such as industrial companies and car manufacturers.

 

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In the pre-opening, the European indices traded with modest gains. Under normal conditions, the good performance of the Nasdaq would be enough to drive European markets more decisively, but at the present stage the strength of the Euro represents a permanent obstacle to the Stocks of the Old Continent. Yesterday, the common currency approached 1.16, penalizing European markets and especially German, which historically has a greater correlation with the European currency due to the weight of the export sector in the index. Investors will now monitor the ECB's meeting tomorrow and the long-term resistance of the Euro / Dollar exchange formed by the 1.16 / 1.1616 zone.

 

[psaTrading]

In the pre-opening, the European indices traded with modest gains. The morning will be based on expectations of the ECB. At today's meeting of this institution, investors will try to find clues as to when this institution will start the process of normalizing its monetary policy. This standardization should be based on the progressive reduction of the asset purchase program and the gradual rise in interest rates.

 

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European markets ended on a downward trajectory, due to the continued appreciation of the Euro and some business results that disappointed the market. The Euro appreciated about 0.20% against the Dollar, a day after Mario Draghi alluded to expectations regarding inflation and the potential end of the asset program. In fact, Mario Draghi pointed to the existence of plans to begin the discussion regarding the gradual reduction of the program of quantitative easing already next autumn. In terms of business, the car sector was among the worst performers, given some published results. On a counter-cycle was Vodafone which advanced 0.85%. The British operator reported quarterly revenues of € 10300 M. (2.20% over the same quarter of 2016), which exceeded analysts’ estimates.

 

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Last friday US indices closed without major swings. American investors have shown little permeability to the strong devaluations observed in Europe. The reason for such resilience is that the strength of the Euro (dollar weakness) detracts from European companies' competitiveness but adds to American companies. Perhaps the American indices would have been able to prolong this week's rally if General Electric's results had not been badly received by the market. Given the relevance of GE in the American industry and in the global economy, the devaluation of its stock had a direct impact on many stocks and on the general sentiment of investors. Despite all the symbolism that GE assumes, its disappointing results do not shake the positive signs given by the earnings season as a whole.

 

[psaTrading]

In the pre-opening, the European indices traded without great variations. The Euro was trading at a slight rise, which should exert pressure on European markets. Yesterday, it should be noted that 10-year German yields were trading again at levels below 0.50%. Now, if German yields remain below 0.50%, the odds, from a technical point of view, of a yield decline are higher than a rise. With regard to the Euro, the most relevant is not so much the German interest rates, but its comparison with the American ones. While the decline in US yields is more pronounced than that of the German bunds, the trend will be for the Euro to appreciate, with all other factors remaining constant. In sectoral terms, the car should deserve a particular highlight. Having been one of the driving forces behind European (and especially German) markets in recent years, in recent months this sector has been under sales pressure as a result of the scandals of pollutant gas emissions, the strength of the Euro and the drop in sales in Europe, After 6 years of expansion.