Trading Journal

In the automotive sector, Peugeot, which is in talks to buy General Motors’ European operations, has announced that it will pay a dividend for the first time in six years after posting a significant increase in its 2016 profit (2150 M. € , 79% higher than in the previous year).

The Dow Jones industrial average rose to a new high, boosted by Chevron and Boeing shares, while the S&P500 index also hit a record high with the appreciation of the energy sector.

Oil prices rose more than 1 percent on the day the US Department of Energy reported that oil inventories rose by 564 000 barrels in the week ending April 17, compared with an expected increase of 3.4 million barrels and after the increase of 9.5 million barrels in the previous week. Regarding gasoline reserves, there was a decrease of 2.62 million barrels, higher than an estimated decrease of 1.16 million barrels.

Yesterday, with the exception of the Nasdaq 100, the US market was bullish. The Dow Jones index hit a new high again, making it 10 consecutive sessions of record closing, something that had not happened since 1987. The S & P500 also hit a record high of 2368 points, boosted by the appreciation of the energy sector.

On the macroeconomic front, the number of weekly applications for unemployment benefits remained close to the 40-year lows. This indicator rose slightly from 6,000 to 244,000, compared to the estimated 240,000.

The US market interrupted the positive trend of the last few days which left stock indexes steadily higher.

President Trump is expected to disclose more details of his fiscal policy, which has been somewhat vague. With US equity markets trading at record highs, investors seem to anticipate that not only will the measures be approved but will have an impact on the economy. It is curious how a politician so little consensual and who arouses conflicting emotions in public opinion has achieved such a broad consensus among investors. Thus, there is a risk that these investors may be disappointed or that the market behaves according to the old aphorism of Buy on rumors sell on facts.

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One of the main news of the day was related to the merger between the two European stock exchanges London Stock Exchange Group and Deutsche Boërse, which could be fought by the European Commission. Consequently, the shares of the two exchanges fell significantly.

Although Donald Trump did not give much detail about the fiscal reform announced during his election campaign, the market was trading higher, with Dow Jones having already surpassed the psychological barrier of 21,000 points. The probability of the Fed raising interest rates returned to the stock market scenario on a day marked by the publication of various economic indicators.

As in the US, the reaction of stock markets in Europe to Donald Trump’s speech last night in Congress was positive, especially in the construction and commodity-producing sectors.

The US market was trading at a slight low. In terms of economic indicators, the number of weekly claims for unemployment benefits has fallen to the low of the last 44 years last week, continuing to point to a strong labor market. This indicator fell by 19 000 to 223 000 in the week ending 25 February (vs. 243 000 expected), thus reaching the lowest since March 1973. This was already the 104th consecutive week in which the number of applications for unemployment benefits Remained below 300,000, the highest since 1970.

The fall of the market on Wall Street ended up impacting Asian markets that ended today’s session in negative territory. Investors’ attentions focused primarily on the US Federal Reserve’s monetary policy. In South Korea, the market was under pressure from the country’s tensions with China.

According to analysts from Wells Fargo, today Factor Orders report, shows that the manufacturing sector continues to improve, although at a slower rate than sentiment indicators alone would indicate. “Factory orders rose 1.2 percent to start 2017. On balance, the hard data in the manufacturing sector continue to show improvement, although the pace has been slower than sentiment indicators alone would indicate.”

“Factory orders rose 1.2 percent in January, boosted by sizable jumps in the notoriously volatile aircraft components for both defense and nondefense. Nondurable shipments rose 0.4 percent, led by growth in textile mills, apparel and petroleum and coal products. Input price pressures are building in the factory sector and have likely helped boost growth in this nominally reported indicator.”
“Core capital goods orders fell 0.1 percent, a smaller decline than indicated in the advanced report, but this improvement was largely offset by downward revisions to December’s reading.”

Components of the Europe Stoxx 600 index showed an average increase of 11% in profits compared to the previous year, the highest growth of the last two years, compared to 4.90% observed in the constituents of the S & P500 index . Among the various factors that may underlie the expected overperformance for 2017 are the weakness of the Euro, the rise in commodity prices and the recovery of the banking sector.

In terms of economic indicators in the United States, new orders to industry increased in January for the second consecutive month, suggesting that the recovery of the sector is gaining momentum, as the rise in commodity prices increases demand for machinery. Thus, orders for goods to industry rose 1.20%, after the increase of 1.30% in December. Economists estimated an increase of 1.00% in January.

This week, another risk factor that may weigh on the global economic growth: the downward revision of Chinese growth estimated by the prime minister. Briefly, a more optimistic speech may be adopted, supported by the release of economic information aimed at strengthening activity, while in terms of inflation the ECB should maintain a cautious discourse.

Yesterday the price of crude fell by more than 5 percent after the Energy Department revealed last week that oil inventories increased by 8.2 million barrels, compared to an expected increase of just 1.2 million barrels.

For the asset purchase program launched in 2015, the ECB indicated that it will continue to make acquisitions at a monthly pace of 80 000 M.€ until the end of March and from April onwards the purchases will be at a rate of 60 000 M.€ until the end of December, or later, if necessary. The main novelty was that the ECB had withdrawn from the statement the phrase about whether the ECB could use “all instruments available” to apply more stimulus to the economy. Mario Draghi explained that this phrase was withdrawn to “signal that the ECB considers that the sense of urgency, which existed when there was a risk of deflation, has disappeared.”