Dax 30; Ftse 100; SP 500 - Market View

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Stock Markets – Closing Note – 25 Sep
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European stock markets closed higher, favored mainly by the oil se ctor. Just as yesterday, the price of oil showed a significant upward trajectory, supported by OPEC's decision not to increase its global supply. Also in the high was the technological sector, with gains greater than 1%. In banking, Deutsche Bank fell 0.71%. According to Bloomberg, the financial institution may use a capital increase to finance the merger with Commerzbank. In Switzerland, Novartis shares rose more than 1%, despite the Financial Times' report on the cut of 1700 jobs in Switzerland and about 400 in the UK, where it is expected to close its operations in Grimsby as part of a plan to reduce production costs and drive profitability. In retail, Next was among the best performers, having reported a 0.50% increase in first half earnings and the decision to raise their annual profit outlook.

Despite fears related to global trade issues, the US stock exchange was trading higher, led by gains in the banking and energy sectors. Banks benefited from a 10-year rise in TO yields nearing year-end highs, while the energy sector was boosted by soaring oil prices. In terms of economic indicators, the S & P Case Shiller index, relative to house prices in the 20 largest metropolitan areas, registered an increase of 5.92% in July compared to the same month of the previous year. Estimates indicated a variation of over 6.20%. On the other hand, the Consumer Confidence Index, as measured by the Conference Board, reached 138.4 in September, compared to the expected 132.1. Investors are waiting for the FED meeting scheduled for tomorrow.

 

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Stock Markets – Closing Note – 26 Sep
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European markets ended in different directions as investors waited for the US Federal Reserve meeting. On the eve of the deadline for the presentation of the first draft of the State Budget for 2019, the Italian market closed at a low, although OT yields were not reacting negatively. Remember that the contrasts between Deputy Prime Minister Di Maio, leader of the 5 Stelle Movement, and the Minister of Finance Tria intensified in the last hours, and Di May threatened not to support the State Budget. In Frankfurt, BMW remained unchanged after the profit warning. The German company reduced its projections for future profits partly due to uncertainties regarding the customs policy in the main economic blocs, which distort the view of economic agents and aggravate selling prices. Other automakers, such as Daimler, also closed lower. Dieter Zetsche, president of Daimler-Mercedes for 12 years, will give up the German brand's executive command, becoming chairman of the board of directors. In Paris, Bouygues rose 2.66%, after J.P Morgan raised its recommendation from 'neutral' to 'overweight'.

Wall Street was trading at a slight high, with the focus mostly on monetary policy. At today's FED meeting, the Central Bank raised benchmark rates by 0.25% to the range of 2% to 2.25%. Officials’ projections for the future path of rates steepened, even as the Fed acknowledged inflation shows no signs of accelerating. This Fed decision comes at a time of renewed fears about trade tensions after Mr Trump's intervention at UN headquarters yesterday. In the Assembly of this institution, Donald Trump reiterated the position of his Administration on world trade, warning that his country "will no longer tolerate the abuse of other nations that harms American workers." In addition, the American President has stated that OPEC is displeasing other nations with a policy that artificially raises oil prices. In the macroeconomic field, IBM shares rose more than 2 percent after UBS raised its "neutral" recommendation to "buy", as it expects the company to report better than expected next year.

 

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Stock Markets – Closing Note – 27 Sep
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

Europe's markets closed slightly higher, with investors reacting to yesterday's Fed meeting and monitoring developments in the budget debate in Italy. Today is the deadline for the Italian Government to present the first draft of the Budget for 2019, but according to the Italian press, this presentation should be delayed due to the divergence within the government, which should await the return of the Prime Minister from the UN's Assembly. The initial losses of the Italian market were later softened by the news that the Italian Executive would meet still today at 8 pm local time and by holding an Italian debt auction that attracted a very reasonable buyer interest. At the corporate level, we highlight the stocks of Sweden's H & M. The Scandinavian retailer reported below-market results and sales, although its market share in several countries has increased. The market reaction turned out to be quite positive, with the stock appreciating 11%.

Major US indices traded higher, still in the aftermath of yesterday's Fed meeting. The Central Bank raised the benchmark interest rate by 0.25% to 2% -2.25%. This was the 8th increase since 2015. In the statement, the Fed increased its forecasts for economic growth to 2018 (from 2.80% to 3.10%) and 2019 (2.40% to 2.50%). After yesterday's rise in central rates, the Fed no longer calls the monetary policy "accommodative", but abandoning such an expression does not mean that the cycle of rate increases is over. According to the individual projections of the Governors of this Central Bank, 12 out of 16 believe that in December rates will increase further. By 2019, a majority of FED members (12 out of 16) estimate benchmark rates to be between 2.75% and 3.25%.

 

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Stock Markets – Closing Note – 28 Sep
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European markets closed with sharp losses, with investors reacting negatively to the course of the political and budgetary situation in Italy. After 12 hours of intense discussion, the directives of Luigi di Mai - (leader of the 5 Stelle Movement) with the support of his coalition partner Matteo Salvini eventually prevailed over the more conservative position of the Finance Minister. Among the measures that have been approved are the attribution of a citizenship income and a partial reform of the Law of Reforms and Pensions. Implementation of these measures will imply that the public deficit will remain at 2.40% over the next 3 years. This budget could shock the European Commission and perhaps force the rating agencies to reassess their analysis of the Italian debt. As a consequence of these risks, Italian yields rose, while stocks in this country, and especially banks, fell sharply. FTSEMIB fell 3.40% and 10-year yields rose 0.25% to 3.15%.

The main American indices traded with slight variations, not showing a high permeability to the tensions caused by the politico-budgetary situation in Italy. Data on household incomes and expenditures were in line with economists' estimates. More importantly, household inflation, the preferred measure of the FED, stood at 2.20%, also in line with forecasts.

 

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Stock Markets – Closing Note – 1 Oct
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

The reaction of investors to the US-Canada trade agreement was positive, with October having a favorable start for European indices. In sectoral terms, gains from the technology sector contrasted with losses made by travel and leisure companies, after Ryanair reduced its annual profit outlook. Air France-KLM depreciated 4.15%. In Milan, the stock market closed at a low, mainly due to the fall in bank stocks. Intesa Sanpaolo fell 4.52% and Unicredit fell 2.18%. In Frankfurt, shares of healthcare company Fresenius rose more than 8 percent after Bloomberg reportedly won a court case against generic maker Akorn. In terms of economic indicators, the PMI index for the manufacturing sector in the Euro Zone stood at 53.2 in September. Economists pointed to the 53.3.

Wall Street has started the session to negotiate higher. Tesla's shares posted considerable gains after news that Elon Musk stepped down as president of the company after reaching an agreement with the SEC that filed a lawsuit against him for fraud. On the contrary, General Electric showed a significant drop following the replacement of CEO John Flannery by Lawrence Culp. In the macroeconomic field, the ISM index for the manufacturing sector reached 59.8 in September, against the expected 60.0. The respective inflation component stood at 66.9, compared to 72.78 expected. Regarding real estate, construction investment increased by 0.10% in August, compared to the expected 0.40%.

 

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Stock Markets – Closing Note - 2 Oct
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European stock markets closed lower, with the financial sector among the worst performers. Leading this negative sentiment was once again the uncertainty associated with the political situation in Italy and, more specifically, the "anti-euro" comments of a senior official of the Northern League, a party that supports the Italian government. According to Claudio Borghi, who chairs the budget committee of the lower house of the Italian Parliament, Italy would have more favorable economic conditions if it were outside the Euro Zone. As a result, 10-year Italian OT yields rose to 3.40%, the highest level since March 2014. A positive note for commodity producers who traded on a counter-cycle on a day marked by rising coal prices to USD 100 per ton in Europe for the first time in more than five years. In terms of business, Azko Nobel advanced 0.48%. The Dutch chemical company has announced that it will distribute the proceeds from the sale of some non-core assets to shareholders by an indicative amount of 5500 M. €. In Frankfurt, ThyssenKrupp rose 0.72%. The CEO of the company said in an interview with a German newspaper that the stock will likely cease to be a constituent of the DAX index.

The US market traded without significant variation, a day after the market reacted positively to the US-Canada trade agreement. Amazon shares were slightly retreating after the company announced it would raise its minimum wage to $ 15 an hour for all US workers. Facebook titles also reacted negatively. On the other hand, the banking sector was trading lower, in response to the downward trend in 10-year TO yields to around 3,050%. Investors followed President Jerome Powell's address on "Prospects for Jobs and Inflation" that took place today in Boston.

 

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Stock Markets – Closing Note - 3 Oct
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European stock exchanges traded in different directions, with investors keeping an eye on developments in the political situation in Italy and global trade. The Italian stock market closed positive, with the main stock index rising 0.89%. Italian 2-year yields fell to 1,200% after Corriere della Sera reported that the Rome government would be willing to make some concessions in budgetary terms. Thus, as anticipated by this newspaper, the deficit for 2019 would remain at 2.40%, but in 2020 it would be 2.20% and 2.20% in 2021. However, there was an increase in the spread between the Italian yields at 10 and 2 years, a new barometer that investors and Italian economists use to assess the degree of risk associated with the country's financial and budgetary situation. The greater the differential between 10-year and 2-year interest rates, the more comfortable the budgetary and financial position of an economy.

Wall Street has begun trading on an upward trajectory, with investors reacting positively to the economic data on the labor market. In terms of economic indicators, the ADP employment report showed that 230,000 jobs were created in September (the highest since February), up from 184,000 estimated by economists. It should be noted that next Friday will be known the employment report. On the other hand, the ISM index for the services sector reached 61.6 in September, above the forecast 58.0. With respect to the debt market, 10-year TO yields rose to around 3,086%, favoring the banking sector. In sectoral terms, the financial and technological sectors led the gains.

 

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Stock Markets – Closing Note - 4 Oct
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European markets closed lower, penalized by the behavior

of the US debt market, namely the 10-year Treasury yields climb. In sectoral terms, and just as on Wall Street, the banking and insurance sectors outperformed. Of note is the gains of the banking sector in Italy, on the day that the 10-Year Threasury yields in the country rose again to 3.33%.

On Wall Street, debt market behavior was the main driver of the market in today's session, after 10-year Threasury yields reached their highest level since 2011, with the breakout of the level of 3.20%. Influencing this behavior were the words of the Federal Reserve Chairman who said that the Central Bank "is far from having a neutral position on interest rates. Recall that economists have pointed to two interest rate hikes this year and another in 2019. Companies like Procter & Gamble, influenced by interest rate swings, lost ground, while banks were favored by this upward move of yields. Of note were J.P. Morgan, Citigroup and Bank of America, which rose more than 1%. In terms of indicators, the number of weekly applications for unemployment benefits reached 207 000, compared to the estimated 215 000. On the other hand, factory orders increased by 2.30% last August, compared with an expected growth of 2.10%.

 

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Stock Markets – Closing Note - 5 Oct
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

Stock markets have been penalized by rising interest rates on US bonds, which has left investors worried that stocks are overvalued as rising financing costs could hurt corporate earnings. Virtually all sectors made a negative contribution, except for the media. The sectors of raw materials, technology, automobiles and energy were the ones that most pressured European markets. Economic data on the US economy continue to show signs of robustness, reinforcing the prospect of further US Federal Reserve interest increases, which will exacerbate the cost of financing quoted shares. This Friday, October 5, the US Department of Labor revealed that the unemployment rate dropped to 3.7% in September, a low of 1969. It is necessary to go back 48 years to find a level of unemployment so low in the US economy.

 

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Stock Markets – Closing Note - 8 Oct
Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:

European markets ended down, with several sectors reporting losses of more than 1%. Banks were again particularly affected by the current situation in Italy. The Italian stock market depreciated more than 2% and OT yields reached new highs. In fact, despite last week's more conciliatory stance, the weekend was marked by harsh criticism of the European project of the two party leaders who form the government. On the other hand, the weakness of the Asian markets, justified by the fall of the Chinese stock exchanges, also influenced the performance of the European markets. The Central Bank of China today reduced the reserve ratio of banks (percentage of deposits that banks are required to keep) by 1%. This announcement heightened fears about the economic impact of trade tensions between the US and China. However, today the Caixin PMI index was published, which describes the activity of service companies (mostly private and small and medium-sized), which in September reached 53.1, above 51.4.

The US market was on a downward trajectory, driven by fears about the recent rise in Treasury Bond yields. However, it should be noted that today the bond market was closed to commemorate Columbus Day.