The results of UBS officially inaugurate the earnings season of the European banking sector. Today, the IMF announce its economic forecasts for 2018. This event is taking place in Davos, Switzerland, where the World Economic Forum will begin tomorrow. This event, attended by politicians, economists, CEOs, central bank presidents, among others, is generally a precious source of insight and opinions from people with a potential to influence the global political-economic environment.
Since December 2012, the US debt limit has been reached and since then the State has operated through a series of legal and accounting subterfuges, without having a budget as such. As time goes by the efficiency and duration of these subterfuges is becoming smaller and it will be important that this problem find a more structural solution.
The recent hyperbolic rise of the indices is uncommon and often leads to excesses, which ultimately leads investors to regret. Thus, a short-term correction may be the best scenario for the continuation of the current Bull Market.
In the uncertain context of recent days, the Hong Kong stock exchange has been a notable exception. This market continues to be used by many global investors as a good way to expose themselves to the Chinese stock markets. In addition to several companies from this country being listed in this market, in the last decade China has become the main economic and commercial partner of this autonomous region, making its companies more interconnected with those of the continent.
Following the close of European stock markets, the US market was trading lower, with investors cautious about rising sovereign bond yields. In the absence of relevant business results, attention was focused on the disclosure of economic indicators.
The Euro rally begins to show some signs of fatigue. A short-term correction may be in progress. A fall below 1.2365 may not imply an immediate appreciation of the European indices if in the US the main indexes begin to show signs of fragility. Often, the devaluation of the Euro translates into a mere overperformance of the markets of the Old Continent vis-à-vis its American counterparts.
It should be noted that of the companies belonging to the S&P 500 index, 80% reported numbers above expectations and 81% beat estimates in terms of revenues. In terms of economic indicators, the ADP employment report showed that 234 000 jobs were created during January, well above the expected 185 000 but below the previous 250 000 observed in December.
Wall Street traded lower on the day the job report was known. The environment was characterized by a rise in yields on sovereign debt and the reaction to business results released yesterday after the closing of three major companies: Alphabet (Google), Amazon and Apple. The employment report showed that 200 000 jobs were created during January, more than the expected 180 000. Salaries rose 0.30%, in line with expectations. These data boosted yields on Treasury Bonds, with 10-Year Treasury Bonds reaching the highest of the last 4 years. Regarding the reaction of technology companies that reported their results yesterday, Apple and Alphabet were downgraded, while Amazon was gaining ground, having already reached a new record high. Of the companies belonging to the S&P500 that have so far submitted their quarterly accounts, 78% exceeded forecasts and 80% exceeded estimates in terms of sales.