Asian markets traded without major fluctuations. Once again, Japan was the exception to extend the recent rise, triggered by the victory of Shinzo Abe in the elections of last weekend. However in China, economic data continues to generate some apprehension. In June, exports fell 4.10% and imports% 8.40. Imports fell for the 20th consecutive month. The fall in exports indicates a lower economic activity in major Chinese trading partners, while another bending of imports indicates a slowdown in domestic demand, which so far has shown some resilience to the general slowdown in the economy.
Yesterday US markets closed higher again, extending the recent appreciation. In addition to the positive environment that has marked the last few sessions, the American indices were boosted by good results from JP Morgan and its effect on stocks of other banks. JP Morgan reached in the 2nd quarter an unexpected increase in profits, with the unadjusted EPS reaching 1.55 USD compared to 1.54 USD in the same period of 2015. Revenues amounted to 25200 M.USD. These figures exceeded the forecasts of analysts who foresaw an EPS of 1.43 USD and revenue 24300 M.USD. The increase in the credit transfer as well as increased activity of the credit cards unit allowed the bank to overcome a very adverse environment. JP Morgan’s shares rose 2%. Today, the earnings season continues with Wells Fargo and Citigroup. The results of Wells Fargo are particularly relevant to the assessment of the situation of the provision of credit to the extent that this institution is the largest lender in the country. The results of JP Morgan improved investor sentiment towards the banking sector, which had previously been penalized by the gradual decline analysts’ estimates and the reduction of perspectives regarding possible increases in US interest rates.
The situation of the Italian banking sector and not yet visible effects of Brexit may have been the reason for the redemption of European equity funds. The funds dedicated to emerging markets gathered 6100 M.USD subscriptions in the last two weeks and funds specializing in bonds with yields and high risk registered 4400 M.USD.
After the UK Referendum its time to switch from news driven volatility trading and to update our models for the near future
Asian markets closed mostly with modest losses. In Tokyo, shares in Nintendo fell almost 13%, a movement from the profit taking following the sharp recorded rise since the launch of Pokemon Go application. In fact, since July 6, Nintendo shares rose from 14900 JPY (Yen) to 32700 JPY reached yesterday.
Asian shares had a positive session, driven by the strong Wall Street performance. Again, the Japanese market stood out positive. In addition to the favorable effect of the US markets, the Nikkei benefited from a report in the Kyodo News newspaper that point in the government Abe will implement a stimulus plan for the economy amounting to 188 000 M.USD. Previously, circulated in the market a rumor that the stimulus would total the 95,000 M.USD.
In recent years, the central banks were the protagonists of the rise in global stock markets by adopting stimulus measures that allowed them to overcome adverse factors such as the loss of the maximum rating of US debt, the crisis of European sovereign debt, Japanese economic stagnation and more recently Brexit, among others. This created a dependence that financial markets have from central banks, a dependency which is demonstrated every time occurs a correction of the markets when the support of these institutions seem destined to decline.
In the oil sector, Schlumberger and Halliburton, two of the largest suppliers of oil sector services, argued that probably the minimum the price of oil may have already been reached. In 2013, the price of crude oil traded at levels above 112 USD / barrel before entering into a strong fall that led earlier this year to levels close to 26 USD / barrel. The oil sector will be the protagonist of this week’s earnings season and its quarterly accounts will be the main challenge for the American markets. Analysts estimate that on average profits from this sector have retreated 71%. More relevant than the results will be the prospects that the CEO of the oil companies will provide.
US markets closed with modest losses. This move was due in part to the oil correction and partly a justified profit taking after the strong gains achieved since the end of June. The decline was widespread, covering 9 of the 10 sectors that make up the S&P500. The only exception was the retail sector. The weakness of the oil conditioned not only its sector such as mining (given the correlation between crude oil and other industrial commodities) and industrial. The Nasdaq was conditioned by some profit taking and the analyst’s decision at BGC to reduce the recommendation from Hold to Sell. For the next 12 months, BGC reduced Apple’s price target from 114 USD to 85 USD. Yesterday, shares of Apple closed at 97.34. This recommendation of the BGC may have cooled the positive sentiment towards the technology sector that the good results from Microsoft and IBM had helped build. Now, attention will focus on results from Apple, scheduled for 21:30 GMT.
The major Asian indexes closed lower, especially the Shangai composite which was losing almost 2.50% at 7:15 am. The only exception was the Nikkei. The Japanese stock market continues to fluctuate according to the rumors about the amount of the tax plan incentive that the Abe government promised. Yesterday, the press pointed to 57000 M.USD this morning circulated news that indicated an amount of 254000 M.USD.
At yesterday’s meeting, the Central Bank argued that consumption (which is the main engine of the economy) continues to accelerate and the labor market recovered significantly after reading May. While not explicitly referring to Brexit, the Fed acknowledged that the short-term risks to the economy decreased. Still, the central bank admitted that it will continue to closely monitor the evolution of inflation (which still remains below the desired level) and the evolution of the world economy. This improved perception of the US economy and the reduction of external risks open the possibility of a rise in interest rates at the next meeting in September.
The long-awaited meeting of the Bank of Japan (BoJ) ended up having a limited impact on Asian session. In addition to a somewhat volatile initial reaction, the major Asian indexes ended trading with contained variations. The BoJ announced that it will double the annual purchase ETF to 56700 M.USD as well as the special program of providing credit to local businesses for a total of 24,000 M.USD. Despite the rise in the Nikkei, the appreciation of the Yen indicates that this decision fell short of the anticipated by the market.
After 5 days consolidating, Last Friday we had an inside day in Dax. It seems we have a good long entry today.
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Happy trading
Good to have you back,
The price of oil rose in a context of emerging speculation about the possibility of the freezing of oil production.
The highlight of today will for the release of the minutes of the last meeting of the Fed (the 26 and 27 July), which may give some signs on the posture of the Fed. The improved perception of the US economy and the reduction of external risks open the possibility of a rise in interest rates at the next meeting in September. However, since this meeting important data have been released, and such as the Fed itself said, with a bipolar character, such as reading of GDP for the 2nd quarter, the employment report for the month of July and retail sales in the same month.
Asian markets closed in different directions. In Tokyo, the Nikkei reached the minimum of the last two weeks, since the appreciation of the Yen decreased investor interest. It was announced today that exports in Japan fell in July at the fastest pace since the global financial crisis, due to the appreciation of the yen and the weakness of external economies.
Last Friday, the US stock market ended lower, with investors showing some concern regarding the Fed decision at the next meeting. Still, the Nasdaq managed to end the eighth consecutive week of gains since April 2010. The session was marked by the traditional weak liquidity and the absence of significant catalysts or business nature, as well as macroeconomic, so there has been another day without any sign to help investors to infer about the actions of the Central Bank. The minutes of the last meeting of the Fed revealed on Wednesday, did not help much in this regard. Moreover, in recent days, investors have also weighed their decisions based on the words of some members of this body as well as the crude oil price behavior. On Thursday, the President of the Federal Reserve of San Francisco, John Williams, joined the group of members that supports a rise in interest rates in the coming months, stating that if the Fed wait too long, such an attitude can entail costs for the economy. In this context, attention is turning to the statements of Janet Yellen in Jackson Hole Conference scheduled for August 26, Friday, the day will be published important data for the country’s economy, such as GDP and the confidence index of consumers.
The appreciation of the Japanese currency detracted from the performance of the leading exporting companies, specially automakers (like Honda and Mazda). The liquidity was lower, with investors waiting for the conference in Jackson Hole.
The banking sector may now be in focus after news about a private study in the UK, which revealed that British banks may lose a large number of domestic and European customers following the outcome of the referendum held last June and which resulted in the Brexit. The oil sector may be conditioned by the oil price drop after the unexpected increase in inventories in the US.