Market environment

___MarketEvolution2___StrategyResults2___TradingStrategy2

Asian markets climb more than 4 percent to extend last Friday’s rally

Asia Pacific markets were bullish during Monday’s session on October 22, with China’s main indices rising more than 4 percent.

The Shanghai composite rose on what was probably its best day since March 2016. Rises in Chinese markets came after the authorities took action to support the market, following the release of weaker than expected GDP data.

Asia02_txt2

In Japan, the Nikkei 225 erased previous losses. The ASX 200 also recovered from some of its previous losses, but still traded lower amid new uncertainties in the country’s political outlook. Most sectors traded lower, with the financial sub-index and the energy sector declining.

The Dow Jones Industrial Average rose on Friday, thanks to solid gains from Procter & Gamble. Wall Street tried to recover its level, after strong sales in the previous session.

During Monday’s Asian trading, the euro and the pound fell against the dollar as investors waited for developments around the Brexit and Italy’s budget plan. The Italian budget has been subject to strong criticism from the European Union.

Oil prices remained stable in Monday’s Asian session. They were supported by uncertainty over the level of supply before the start of US sanctions against Iran’s crude oil exports. The increase in drilling activity in the United States, however, contributes to the fact that prices do not rise beyond what is desired by the Americans.

Gold prices rose in the early hours of Monday, approaching the two-and-a-half month high reached last week. Asian equities fell amid rising political tensions, and concerns about slowing global economic growth, benefiting safe assets.

European markets are expected to open mixed on Monday.

Wall Street increases losses in October

Wall Street turns downward on Monday, October 22, after starting the session with a moderate rebound. All this in the beginning of a week in which the business results of large companies in the technology sector will focus the attention of investors.

WallStreet01_txt

The market closed with a mixed sign last Friday and fails to recover the falls accumulated by the Dow Jones and the S&P 500 in October. In the case of the Nasdaq, the monthly loss is above 7%.

On an economic level, one of the protagonists is Netflix. The company’s shares fall around 3%, after announcing that it plans a bond issue for 2,000 million dollars.

In the commodities market, oil is rising in response to Saudi Arabia’s plans to raise the price in retaliation for the West’s protest against the Khassogi case.

Very attentive to the fear of investors

A bullish session in Europe on Monday 22 October but, little by little, the day’s highs were lost.

This is an extraordinarily complicated moment, because the current scenarios are all negative. This feeds uncertainty, which is not good when growth prospects have been reduced.

Europa01_txt2

There is a lot of money coming into the secondary debt market, both from Spain and Italy, which is driving down rates. The rating agency Moody’s has downgraded the rating to Italy, but keeps the outlook stable.

Once again there is the hunt for returns, which has been felt in both the Spanish and Italian markets.

Banks have benefited from this situation, but the instability of the sector, directly linked to the yield and behaviour of public debt, is favouring sales.

Cajas_07

Debt market

The yield on the 10-year American bond slackens slightly to 3.18%.

The survey of fund managers, conducted by Bank of America Merrill Lynch, indicates that professional investors have not changed their fundamental view of the market.

Only if the yield on this bond exceeded 3.7% would there be a massive rotation from the stock market to the bond market.

The increase in short-term bond yields translates into increased competition for capital.

The Federal Reserve’s monetary policy, which includes gradual increases in interest rates, together with trade tensions between China and the United States, has helped trigger the collapse of stock markets.

Cajas_12

95% of the Brexit pact is achieved

The British Prime Minister defends herself against rumours of a rebellion within her Conservative Party.

A new day of tension in the UK, with the pound falling at the risk of Theresa May’s government being displaced in full negotiations.

The Prime Minister goes to the House of Commons with the aim of buying a little more time to close an agreement that allows an orderly exit on 29 March 2019.

According to Downing Street, the conservative leader will tell parliamentarians that almost the entire agreement has been reached. Including the future of Gibraltar, security coordination, respect for Europeans’ right of residence in the UK and the continuation of the British military base in Cyprus.

Only the customs relationship between the Republic of Ireland and the British province of Northern Ireland remains to be determined. London and Brussels agree to avoid introducing controls at that border, but the two sides have different solutions.

 

Market pressure is enormous on the Italian government

It will not be Brussels that cuts Italian budgets. It will be the market.

Cajas_05

If this continues, the losses that the Italian economy could have would be greater than the supposed profits of the budgets that are presented.

The head of the Italian banking association has just warned that the banks cannot resist the constant growth in the profitability of Italian bonds.

Cajas_11

Macroeconomic data

On Wednesday, the release of the leading indicators for the service and manufacturing sectors will be released for the month of October.

Also to be released are September’s new home sales and weekly U.S. crude oil inventories, as well as the Fed’s Beige Book.

On Friday, the preliminary GDP for the third quarter will be released from the U.S., which will be the most important figure of the week. The consensus expects growth of 3.3%, after an impressive 4.2% in the second quarter.

Cajas_13

The energy sector has bad news

The cause is due to Baker Hughes’ count of oil installations, which shows a new rise.
The overall figure would be above recent highs.

There appears to be an acceleration in US production, in an attempt to compensate for the general lack of supply.

The imminent sanctions against Iran are weighing heavily on the situation in the energy sector.

News01

 

 

Relevant news of the day

 

Strategies_txtResults

 

 

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

Tit00_VolverIni

 

Advertisements