Dax 30; Ftse 100; SP 500 - Market View

The beginning of the week was marked by a positive trend registered by most European indices and by various sectors of activity. The utilities and banking sectors lead the gains. Societe Generale rose 0.73%, while Unicredit fell 1.34% on the day the Financial Times said the two institutions are considering a merger. This news was not officially confirmed. On the other hand, Air France KLM was among the best performers, after AccorHotels said that it is analyzing the acquisition of a stake in the airline.
 
On the macroeconomic front, the PMI economic activity index for the Euro Zone fell to the low of the last 18 months to 54.10, in line with expectations. The same indicator, but relative to the services sector, was 53.80, compared to the expected 53.90.
 
European markets closed in different directions, though contained. During today’s session, investors’ sentiment was influenced by the political situation in Italy, as well as the comments made by the central banks. Yesterday, just a few “more populist” words from the new Prime Minister Conte in the Senate were enough to cause a rise in Italian yields (especially those with a maturity of two years). Today, this upward movement of Italian sovereign yields remained, which again penalized the banking sector.
 
In the pre-opening, the European indices rehearsed with some gains. Today will be the scene of the contrast between two factors. On one hand, the good performance of Wall Street, which should benefit the most cyclical sectors in Europe. But on the other hand, investors will have to face a new upward movement in yields but this time has a different nature. Yesterday, the session was driven by a rise in sovereign yields, but unlike in previous days, was not due to the political situation in Italy. Spurring the new upward movement of these interest rates were statements by Peter Praet. The ECB's Chief Economist has stated that this institution is progressively more confident that it will reach its goal of 2% of inflation. These statements indicate that during next week's meeting the topic on the end of the debt acquisition program will certainly be debated.
 
The day was slightly negative for most European markets, with investors waiting for the G7 meeting this weekend in Canada as well as the European Central Bank meeting next week. In fact sales pressure has focused mainly on the financial, automotive, chemical and commodity sectors. In Germany, the economic data published sparked fears about the state of the country's economy. After yesterday data on orders to industry have disappointed the market, today it was announced that industrial production fell 1% in April compared to the previous month (against a forecast of a slight increase of 0.30%), while exports decreased 0.30%, in line with the estimates. In some German newspapers circulate rumors, not confirmed, that Deutsche Bank is studying a merger with Commerzbank. In this market, Commerzbank fell 1.96% and Deutsche Bank fell 1.22%.
 
European markets ended the first day of what will be (according to some economists) the most important week of the year. After falling last week, the Italian stock market led the gains, with a valuation of 3.43%. The new Italian Finance Minister has stated in an interview, with Corriere della Sera, that a departure from his country of the Euro is not being studied and that the Government of Rome will combat any deterioration of the economy that could give rise to such a scenario. As a result, the banking sector was among the best performers, with investors waiting for the FED decision scheduled for Wednesday and the ECB meeting scheduled for Thursday.
 
The meeting between President Trump and North Korean leader Kim Jong Un ended with the signing of a cooperation agreement between the two countries. Details of this understanding have yet to be announced. It is important to remember that the agreement reached today is the first and important step in a process of normalization of relations between the USA and North Korea and of that country with its southern neighbor. It is crucial to understand today's meeting as an integral part of a process that should be long and susceptible to setbacks: 64 years of tensions do not end in a single day.
 
European markets were trading higher, with the market waiting for the FED (today) and ECB (tomorrow’s agenda) meetings. In sectoral terms, technology companies and raw material producers led the gains, with valuations higher than 1%, while the telecommunications sector led the losses. In retail, Inditex securities reacted with a valuation of around 3% to the publication of its quarterly results: the net result reached 668 M. € vs. 643 M. € forecast. However, sales, a key variable in a retailer, reached 5654 M. € vs. 5820 M. € estimated. Gross margin gains offset lower-than-expected sales. Oil prices rose a day after OPEC said oil prospects in the second half of 2018 were highly uncertain and warned of falling demand.
 
European markets ended up in a session marked mainly by the meeting of the European Central Bank. Most of the stock market indexes and activity sectors ended up positive. At today’s meeting of the European Central Bank (held in Riga), it was decided that the asset purchase program will remain at the current pace of 30,000 M. € by the end of September 2018. After this time, to data on medium-term inflation outlook, the buying pace will be reduced to € 15 000 M. by the end of December 2018, ending at that time. In addition, the statement said that “the Board of Governors expects the ECB’s key interest rates to remain at current levels at least through the summer of 2019 and in any case how long it will take to ensure that remains in line with current expectations of a sustained adjustment.
 
European stock markets ended lower, with investors opting for some profit taking after yesterday's gains triggered by the ECB's meeting. Leading the losses were the banks and the producers of raw materials, the latter still reflecting the economic data revealed yesterday by China and the news about the new customs tariffs announced by Trump. On the other hand, other stocks, for more specific reasons, stood out positively. Rolls Royce rose more than 9 percent after announcing a plan to settle the company's accounts, which includes cutting 4600 jobs. In retail, Tesco gained ground, having reported sales for the first quarter in line with forecasts and confirmed its outlook. On the contrary, in Stockholm, H&M retailer titles were under pressure, after the company reported quarterly sales below estimates. On the macroeconomic level, and after the ECB's statement yesterday, Eurostat said today that the inflation rate in the Euro Zone rose from 1.30% in April to 1.90% in May, the highest level since April of the year past.
 
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