The increase in inflation may be signaling some recovery in economic activity, particularly consumption. This fact mitigates the fears aroused by last fall in imports and exports.
The results of the banking sector, published on Friday, were entirely good and managed to alienate some fears caused by Alcoa and Ericsson. The President of the Fed argued that the central bank can tolerate a higher than desired inflation to ensure that the economic expansion continues to solidify. Today, the Vice President Stanley Fisher will be present at a conference organized by the Economic Club of New-York.
The appreciation of oil in the Asian session were due to the decline in the dollar and a study by Bernstein which indicated that the accumulation of world oil reserves decreased in the 3rd quarter of this year, reaching the lowest value since the last quarter of 2014.
Oil (quoted in New-York) continues to trade in a very volatile way but not descending significantly below 50 USD / barrel has been enough to give some support to its sector and more indirectly to the market as a whole. These good results overshadowed economic data, which seem to strengthen the arguments of those defending an increase in interest rates in December.
Today, Asian markets had a relatively quiet session, achieving modest gains. In Japan, valuations were more significant due to various business news and the interruption of the last two days recovery of the Yen against the Dollar.
Asian markets closed in a slight downward. The appreciation of the dollar pressed the price of oil and its sector. However, the Japanese market was favored by the downward trend of the yen against the dollar, a behavior that favors the major exporting companies.
The behavior of Italian banks can influence the behavior of the Spanish and German pairs in a week in which many European banks will publish their quarterly accounts.
Today DAX reached 10825, overcoming the level of 10800. The medium-term consolidation phase may be over and a new upward movement is now technically possible.
The protagonist of the earnings season in the banking sector will be the Deutsche Bank which reports its accounts tomorrow.
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.
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.
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.
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.
The labor market has given signs of dynamism, wages maintained their trend of modest increases, inflation accelerated slightly, while the conditions of the other world economies apparently stabilized.
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.
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.
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.
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.
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.
During the American session, the overperformance of the oil and defense sectors and an underperformance of the renewable energy companies of health services (which would be the sectors most benefited by a Hillary Clinton presidency) should be watched.