World Stock Indexes Trading - page 10

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Investors are positioning themselves for the realization of the ECB meeting tomorrow. This position will be seen in the stock market as well as in the currency and bond markets.

 

US markets closed with modest gains, which were mainly due to the rise in the oil sector, resulting from the sharp increase in crude price. The Department of Energy revealed that US oil reserves rose by 3.88 million barrels, a variation above 3.17 million estimated. After this increase, the American oil reserves reached the highest level since the decade of 30. However, for the 3rd consecutive week, gasoline stocks suffered a bending, this time of 4.52 million barrels (estimated – 1.49 million). To this information were added the statements of the Iraqi Minister of Petroleum who said OPEC members and other producers outside the cartel will meet in Moscow on 20 March. The other sectors did not experience significant changes, except the biotechnology companies which declined throughout the session, ending with a loss of 1.15%. Today, attention on Wall Street will focus on the reaction of European markets to the ECB meeting .

 

In the pre-opening, European shares showed some gains. The reason for this initial rise is justified by a technical reaction to yesterday's falls and rising oil in the Asian session. The last session was particularly volatile, with the major indexes reaching gains between 2% and 3% before finishing with a devaluation of 1% to 2%, and it is worthy of a brief analysis. The reasons for yesterdays' behavior in the European equity indexes are essentially two. The first relates to the fact that the ECB did not have introduced a system of different interest rates to liquidity that banks hold with that institution. Negative interest rates penalize the profitability of banks, as these can not compensate for the negative rates of their deposits with a decrease in the interest rate on deposits of their clients. The ECB could have differentiated what is a necessary or prudential liquidity of excess liquidity by applying them to different interest rates. The adoption of such a measure could mitigate the negative effects on the banking sector of a further reduction in interest rates on deposits. The adoption of negative interest rates on deposits have been one of the causes of strong underperformance of the banking sector in recent months. The second reason was the reaction of the euro. The European currency had the widest intra-day variation of this year, ranging between 1.0822 and 1.1116 in just over 30 minutes and later reaching 1.1217. The rise of the European currency is perhaps explained by the fact that in the forex market all measures taken by the ECB (with the exception of the reference rate descent) had already been anticipated by investors. In addition, in the lines of his speech, Mario Draghi has indicted that the potential decline in interest rates is from yesterday onward, quite limited.

 

US markets closed with fairly sharp gains, thus achieving the 4th positive consecutive week. The reasons for the positive trend are several. The main reason for this last rally will be due to the perception that the risks of the US economy into recession are minimal. After an early uncertain year marked not only by the turbulence of the financial markets and the slowdown of the economy, economic indicators for February showed a very dynamic activity. The latest and most striking evidence was the employment report, released on 4 March that signaled a very dynamic labor market, with the economy approaching full employment. The second reason is due to the resilience of oil price, which recovered about 35% from the minimum of the year. Another factor that has contributed to the Wall Street rally is the need for many institutional investors to monitor the rise in their benchmarks. Furthermore, last week for the first time this year, subscriptions of equity funds were greater than redemptions, which provides more liquidity to fund managers apply to the equity market. Perhaps the only catalyst which is confined only to the Friday session was the reversal of the sense of European investors to the decisions of the ECB. Because of the change of time in the US, trading in the US stock market will start today at 13h30 and will end at 20h00 (GMT). Only on 28 March US markets will resume to normal trading hours (14h30-21h00 GMT).

 

Investors began to position themselves for the meeting of the Fed, which starts today and ends tomorrow.

 

The expectation of today’s meeting of the Fed dominated the Asian session. In fact, there has been a decrease in the volume and volatility, and most investors adopted a defensive stance, which explains the decrease of some stock exchanges such as the Japanese and Hong Kong.

 

Among the many positive consequences of the meeting of the Fed stood a particularly negative for European markets: the appreciation of the Euro. This effect should penalize, in time, the European export sector. Among the most correlated with the Euro figure index DAX.

 

Today, as in Europe, will expire futures contracts and options called quadruple witching. Quadruple witching days are usually accompanied by considerable volatility in stock and derivative prices, as well as increased trading volume, with the occurrence of erratic movements. The most most volatile time of day shall be 13h30 (open) and 18h00. Statistically, the sessions of quadruple witching are positive for the equity markets.

 

The rally performed by the price of oil in recent days continued to support the stock market. In fact, this upward trend of oil not only boosted the energy sector as well as the financial sector since eased some fears that have been hovering in the market regarding the impact of the growing number of oil companies bankruptcies in banks.

 

The view of the members of the Fed in face of external economic and financial environment is now seen as less optimistic.

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