Dax 30; Ftse 100; SP 500 - Market View

[psaTrading]

The recovery of the Euro Zone economy continues to gain momentum. The Euro Zone grew 2.5% in the third quarter of this year compared to the same period in 2016, the strongest pace since the start of 2011. This result allows the euro countries to take off from the United Kingdom, as well as from the United States.

 

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After yesterday’s strong valuation of the DAX, we could see some profit taking by some investors of very short term, the so-called fast money.

 

[psaTrading]

Dow Jones Industrial Average is holding above the 10-week moving average that should provide a good dynamic support for next week.
Expecting a downward move to a Fibonacci retracement at 22,650 on a break below the previous week low at 23,201 however a break above the 2017 high at 23,435 may set in motion another bullish run to a Fibonacci extension at 24,111.

 

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The positive trend on Wall Street continued at the beginning of the week as the end of the earnings season approached. Broadcom has officially launched the takeover bid for Qualcomm, which is the largest technology operation ever, valued at 103,000 M.USD. Advanced Micro Devices was up 5.90% on news that it plans to partner with Intel to form a personal computer chip unit. Meanwhile, investors were also paying attention to President Donald Trump's statements during his visit yo Asia, concerning North Korea's nuclear missile program and foreign trade.

 

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In a scenario of a slowdown in the release of corporate results, some stocks renewed new highs, even though stock indexes kept fluctuating.

 

[psaTrading]

With the economy expanding to 3% and with interest rates at low levels, many companies are tempted to expand through mergers. With funding rates at historically low levels, a merger or acquisition may be the fastest route for a company to increase its size and market share.

 

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In US the budget committee warned that the proposed Republican tax reform would increase the public deficit by more than 300,000 M.USD than estimated by this proposal. Accordingly, the deficit threshold approved by the Senate (1 500 000 000 M.USD) would be exceeded. Today’s session is expected to be conditioned by the behavior of oil, the presentation of the results of some retailers such as Kohl’s and Macy’s (which signals the end of the earnings season), possible developments regarding the tax reform and news related to the visit President Trump to China.

 

[psaTrading]

Last Friday European markets resumed trading under selling pressure. The bottom line of this downward movement is more about more technical factors (the profit taking after strong gains in recent weeks) than on macro or microeconomic issues.

 

[psaTrading]

European stock markets ended lower, with most sectors reporting this behavior. The financial sector was among the worst performers, with investors worried about US tax reform. In Paris, EDF depreciated, after lowering the estimates of results and cash flow for 2018 due to the lower expected energy consumption, the lower availability of some of its nuclear reactors at the beginning of 2018 and a decrease in the capacity of compensation in Great Britain. Meanwhile, oil prices traded slightly higher, after OPEC raised its prospects for oil demand in 2018.

 

[psaTrading]

Mario Draghi will be present today at an important forum organized by the ECB, which will also include the Governor of the Bank of England, the Governor of the Bank of Japan and the Governor of the FED Charles Evans. Mario Draghi's intervention is scheduled for 10:00 a.m. Mario Draghi's words could be a catalyst for debt markets and could dictate the yield trend today.