Dax 30; Ftse 100; SP 500 - Market View

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The US market traded positively, with investors expecting the Fed meeting. The current FED meeting is the last meeting of the Yellen Presidency. Although the mandate of the current President will not end until February 2018, Janet Yellen will entrust the Central Bank with Jerome Powell, the newly appointed President of the Fed. Financial markets have already anticipated the near-steady increase of 0.25% in interest rates to 1.25% -1.50%. The focus will therefore be on two themes: the revision of the macroeconomic projections and the individual perspectives of each FED member for interest rates in 2018.

 

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The US market declined, one day after the Fed’s decision to raise benchmark interest rates. The meeting of the Central Bank generally corresponded to the expectations of the previous day. The benchmark rates increased 0.25% for the 1.25% 1.50% range. This decision had two opposing votes, from the Fed Governors of Chicago and Minneapolis, who preferred a maintenance of reference rates. The content of the communiqué resembled the one from the end-October meeting, although it took an even more positive view of the economy and the labor market. In this positive view of the economy, the FED has improved its estimates for GDP growth to 2018, which is expected to be 2.50% from the 2.10% previously anticipated. Projections for the years 2019 and 2020 also improved to 2.10% and 2% respectively. Curiously, neither the press release nor the press conference made any reference to the impact of a possible tax reform. To remember that also yesterday, elements of the Republican Party reported having reached an agreement in principle on the fiscal package, with the Republicans of both chambers of the US Congress satisfied with the consensus of the versions proposed and approved in the House of Representatives and the Senate.

 

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Concerning Final Tax Measure, expected to be voted on next week, one significant change from the Senate bill is that the rate reduction (to 21 percent from the current 35 percent) will begin next year, instead of being delayed until 2019. One should see a chaotic last few weeks of 2017, as companies try to best position themselves.

 

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The reconstruction of strategies leads to a chain of movement in the stock markets, forcing the intervention of other types of investors. This quarter, the rebuilding of some derivative strategies ended with the influx of several stock purchase orders into the market.

 

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In the United States, homes under construction during the month of November increased by 3.30% to 1,297 million, compared to the expected 1,250 million. On the other hand, the number of building permits decreased by 1.40% to 1,298 million. Economists estimated 1,270 million licenses.

 

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Yesterday the session was marked by the realization of some profit takinhg. This move had its epicenter in Apple shares. Nomura's recommendation to reduce in Apple served as a motivation for a number of investors to realize some profit takinhg, not only in this stock but also in the technology sector as a whole.

 

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The approval of the tax reform is a victory of the Trump Administration that managed to approve it at times that can still be considered short, overcoming the objections of several members of the Republican Party itself .

 

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Friday session was poor in news, which, along with the current court, contributed to a decrease in volume. Roche announced that it will acquire the American Ignyta (specialized in cancer treatment) for 1700 M.USD. Roche shares fell 0.41%. At the sector level, the banking sector was penalized by the weakness of the Spanish banks. On the positive side, the media sector stood out.

 

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The retail sector stood out positively after Mastercard reported that US consumers spent more than 800,000 M.USD on holiday purchases, a number considered a record. This behavior was driven mainly by the increase in consumer confidence, the growth in employment and the fact that rebates in stores started earlier.

 

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Today’s session is part of the period that corresponds to the so-called Santa Claus Rally. This period includes the last five sessions of the year and the first two of the new year. The Dow Jones and S&P500 indices completed at the end of last week five consecutive weeks of gains as a result of the tax reform announced by Donald Trump that reduces corporate taxation from 35% to 21%.