If on one hand the theme of Brexit was once again the order of the day, on the other hand the approach of the second round of the French presidential elections (There is a televised debate between the two candidates Emmanuel Macron and Marine Le Pen) is also to be monitored. Regarding Brexit, some news reports say that Europe 'seems to be divided' with France and Germany tightening their positions on the UK. According to a Financial Times analysis, the gross amount to be paid in advance by the United Kingdom may amount to € 100,000 M., an amount almost twice as high as the € 60,000 M. initially suggested by the President of the European Commission, Jean-Claude Juncker. The results published yesterday in the US by Apple could condition the actions of several European technology companies that are suppliers of the Cupertino company.
Most Asian markets closed lower, although the Japanese stock exchange was closed for a holiday (“Green Day”). Producers of raw materials reported losses due to falling metal prices following the publication of the PMI index for the manufacturing sector in China. This indicator dropped to 50.30, the lowest reading since September 2016, raising doubts about the growth of the country’s economy which is the world’s largest copper consumer.
Yesterday, after the election results were known, the Euro appreciated against the Dollar for the highest level of the last 6 months and against the Yen for the highest value of the last year. The recent behavior of the markets already had discounted a victory of Macron, limiting now a further rally.
Companies have exceeded forecasts because of revenue growth and not so much because of a cost-cutting program. On the other hand, analysts' forecasts have been successively improved. In the case of the United Kingdom, the devaluation of the Pound and the rise of the prices of the raw materials will have been motors of the good performance achieved.
The energy sector led the gains of the S & P500, reflecting rising oil prices, after Iraq and Algeria joined Saudi Arabia to support an extension of production cuts by OPEC. In addition, US oil inventories declined more than expected. Despite this, this rise in the price of crude was not enough to recover from the losses recorded last week. The US Department of Energy reported today that weekly oil inventories fell by 5.2 million barrels, compared to estimated 1.9 million barrels. Inventories of gasoline fell by 150,000 barrels, compared with an expected increase of 65,400 barrels.
The rally unleashed by the result of the 1st round of the French presidential elections led the main European indices to extremes from the technical point of view. This condition coupled with the sharper drop in these indices yesterday, increases the likelihood of a short-term technical correction.
European markets were trading bullish, with investors outpacing the possible effects of the International Cyberattack of “WannaCry” virus, as well as the latest missile test in North Korea. In fact, the regional elections in Germany, as well as the prospects for an extension of the oil production cut by Russia and Saudi Arabia, contributed to the positive sentiment of the investors. An analysis by Bank of America Merrill Lynbch notes that investment in European equity markets has shown strong growth, but there is still room to recover further. In the US, the uncertainty that has recently surrounded the Trump Administration, particularly with regard to tax reform, has left investors with greater uncertainty.
In pre-opening, European markets were trading in different directions. The Earnings Season is nearing its end, but today investors will still have to react to the results released by Vodafone and EasyJet. On the other hand, macroeconomic information will also be in the spotlight, as well as the oil price behavior that has been closely monitored in recent days. Today will be known the advanced estimate for the GDP of the first quarter of the Euro Zone. The recently released indicators have shown a favorable momentum in the first months of the year in all the countries that share the Euro. The meeting between the French President Emmanuel Macron and the German Chancellor Angela Merkel resulted in a joint demonstration of the two concerning a possible revitalization of Franco-German relations, which have been the driving force of the various member states of the European Union. Angela Merkel expressed her openness to achieving measures that guarantee the future of the European Union.
In the pre-opening, the European markets traded lower. Political fears may once again condition investors' decisions following news that US President Donald Trump has asked former FBI Director James Comey to close the investigation to Michael Flynn, who was an advisor to the President To National Security for about a month. All of these news have heightened concerns about Donald Trump's ability to implement the announced program of measures, which includes tax reform and infrastructure spending, and has recently been one of the driving force behind stock markets.
Asian stock markets ended on negative territory in the face of mounting political uncertainties in the United States. The Dollar depreciated significantly against several currencies, having reached the minimum of the last six months against a set of some currencies. Despite OPEC's efforts to curb overproduction, oil prices have fallen again.
The opening of markets was marked by the absence of relevant corporate news, and in macroeconomic terms the agenda is also not very fulfilled. The highlight is the consumer confidence index of the Euro Zone for the month of April. According to economists, this indicator should remain relatively stable, after showing a worsening in the previous month. The decline in political uncertainty in France and the improvement in economic conditions on the basis of economic indicators should support confidence in the coming months. Remember that in recent days, political uncertainty in the US has favored the bond market.
Political instability in Washington has influenced the decisions of American savers. According to Merrill Lynch Bank of America, in the week ending last Friday, specialized stock funds in the American market suffered redemptions of around 8900 M.USD. The main beneficiaries were the bond funds (subscriptions of 9900 M.USD) and to a lesser extent the European shareholder funds (subscriptions of 1100 M.USD).
The Asian squares ended the session on mixed terrain. Moody's downgraded China's debt rating from 'Aa3' to 'A1', predicting that authorities would approve more economic stimulus. However, the agency has shifted China's 'negative' outlook to 'stable', since at 'A1' level, 'risks are balanced', highlighting the country's mechanisms to halt financial instability. Despite expecting Chinese GDP to continue to grow, Moody's ensures that the country's growth will slow in the coming years.
Asian stocks were mostly up, reflecting the publication of the Fed's minutes and investors waiting for the OPEC meeting. In China, markets ended in different directions after Moody's decision to cut the rating of the country that led the Shanghai stock exchange to the lowest level in the last 7 months was announced yesterday.
In the pre-opening, the European markets negotiated with a negative tendency. OPEC's decision to extend the reduction in oil production for nine months has somehow disappointed financial market players hoping to announce additional cuts in output. This sentiment immediately triggered a drop in oil prices and a deterioration of investor sentiment. With no economic indicators on the agenda today, investors will follow the G7 meeting in Sicily, Italy, which will cover issues such as trade and climate change.
The North Korean nuclear and missile program continues to be a major issue as the country faces increasing pressure from the US and China on its missile test program. This was the 9th missile test conducted this year.
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