Dax 30; Ftse 100; SP 500 - Market View

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Oil continues to be an influential variable in the current panorama of the equity markets. Yesterday, crude oil closed at 49.20 (-1.60%), a particularly volatile session, on the day the Energy Department showed a drop of oil reserves (-553 thousand barrels), against the predictions and calculations published on Tuesday by the American Petroleum Institute. Gasoline reserves suffered a higher decline than estimated.

 

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Yesterday, the earnings season reached its mid-point, as 50% of the constituents of the S & P already submitted its quarterly accounts. Until yesterday, about 73% of companies surpassed analysts’ forecasts and about 61% did the same concerning revenues.

 

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The beginning of this week should be particularly intense because beyond corporate news, European investors are faced up with the electoral campaign in the United States and the difficulty of OPEC in achieving a consensus on the reduction of production.

 

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In an environment marked by uncertainty regarding the outcome of the presidential elections, the US market traded slightly higher, with economic indicators released to reveal a consistency with previous published figures suggesting that the Fed will raise interest rates in December.

 

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According to some technical indicators, the recent rise in the DJ Stoxx Banks reached extreme levels, so in the short term, some of the positive news may have already been discounted by the market.

 

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Today it will be published the employment report, which according to the forecasts of economists, should confirm the dynamism of job creation. Even if the generation of jobs is lower than estimated, should not alter the course of monetary policy, unless it is a read out of the norm. Most likely, the importance that markets will give to this indicator should be higher than the one given by the FED.

 

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Generally financial markets prefer the status quo, ie always prefer a candidate who give continuity with the previous presidency to a candidate who can take little predictable contours. This preference overrides any political color; markets simply prefer the less uncertain candidate.

 

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At an early stage, European investors will react to economic data in China, as well as to the results published before the opening. Afterwards, there will be a long wait, awaiting investors for the results of the American elections.

 

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Yesterday, Asian markets were the first to react to the outcome of the American elections and as such it was in that region that the falls were more pronounced. Thus, today’s recovery was a process of convergence of the Asian stock markets to the behavior of other world indices.

 

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With the renegotiation of trade agreements and the lifting of customs barriers a more complex and time-consuming legislative process, investors seem to focus more on the new President’s intention to reduce taxes, reduce regulation in a number of sectors and outline an ambitious infrastructure plan Structures. In general, these measures would have a positive impact on the economy and profits of various companies, which explains the strong rise of some sectors in Europe and the US. The interpretation of the bond market seems to be the same. US yields continue to rise with the prospect that such measures will increase public spending and inflation. Given the high uncertainty regarding the details of the new Presidency’s economic policy, markets should remain volatile. In the short term, the notable rise in stock markets over the last 48 hours seems likely to rebound.