Trading Journal

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.

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.

psaTrading posted:
The protagonist of the earnings season in the banking sector will be the Deutsche Bank which reports its accounts tomorrow.

Will make interesting viewing.

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.

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.

Yesterday, Asian markets were the first to react to the outcome of the American elections and as such it was in that region that the falls were more pronounced. Thus, today’s recovery was a process of convergence of the Asian stock markets to the behavior of other world indices.

With the renegotiation of trade agreements and the lifting of customs barriers a more complex and time-consuming legislative process, investors seem to focus more on the new President’s intention to reduce taxes, reduce regulation in a number of sectors and outline an ambitious infrastructure plan Structures. In general, these measures would have a positive impact on the economy and profits of various companies, which explains the strong rise of some sectors in Europe and the US. The interpretation of the bond market seems to be the same. US yields continue to rise with the prospect that such measures will increase public spending and inflation. Given the high uncertainty regarding the details of the new Presidency’s economic policy, markets should remain volatile. In the short term, the notable rise in stock markets over the last 48 hours seems likely to rebound.

Since Wednesday there has been a generalized rise in world yields, a movement that gains greater expression in those countries where public debt is high. In the short term, the rise in the US yields and the US Dollar have reached extreme levels and may therefore be corrected. The long-term trend of these two variables should be traced when the new US Presidency provides more detail on the economic measures it intends to adopt.

Today, the Republican Party will elect its leader in the House of Representatives. This election will be a good opportunity to assess the relationship between the party and the President. One should notice that during the campaign, several exponents, such as the current leader of the House of Representatives Paul Ryan, did not support the candidacy of Donald Trump. For President Trump to implement his economic measures requires the consensus of the Republican Party.