Market View; World Stock Indexes; Trading Journal

With today’s speech the Governor of the San Francisco Fed (John Williams) at a conference organized by this institution starts an intense week of speeches among the Central Bank members. Among the various interventions, the focus is on Janet Yellen on Wednesday. Statements by members of the Fed will help investors define their expectations for the next meeting of the Central Bank in December.

The technology sector may benefit from the Nasdaq that have approached the maximum of the last 15 years.

In China, investors reacted with enthusiasm to the PMI index, which have reached 52.0 in October, the maximum of the last 3 months. Furthermore, the positive sentiment was reinforced by the words of President Xi Jiping. The President of China stated that the annual growth of the country will not be lower to 6.50% over the next five years. Additionally, it was revealed that the President of the Central Bank of China wants to establish a closer relationship between Shenzhen and Hong Kong exchanges, which will enable greater access to investors resident in the latter square the Chinese stock market.

American indices closed lower, due to the oil drop, the words of Janet Yellen and dynamism shown by some economic data. The price of crude has been hit by rising reserves in the US, in line with the estimated and also the strength of the dollar. The testimony of Janet Yellen on the finance committee of the House of Representatives focused mainly on the US financial system. The Fed’s President said that should be made improvements to the risk management and also in what concerns the compliance in the largest banks and regional institutions, which will induce the central bank to adopt rules on this matter. For interest rates, said an increase in December is “a real possibility” although it depends on the evolution of the economy.

Traders boosted bets that the Fed will raise rates next month after the labor report.

It is difficult to find any weaknesses in Friday’s employment report. Thus, the odds of an increase in interest rates rose to 70% compared to 58% the day before and 39% from the end of October.

It's quite likely that there will be a relatively “traumatic event” in global markets once the current period of low interest rates comes to an end.

Investors will now focus their attention to the intervention of Mario Draghi at an event organized by the Central Bank of England at 13:15.

A factor that marked the session was the weakness of oil. Yesterday it was reported that off the US and China are dozens of supertankers with about 100 million barrels on board. The cargo of these ships belong often to commodities trading companies awaiting the rise of crude price to sell the barrels they hold.

Oil continues to suffer the pressure generated by solid evidence of an oversupply and strength of the dollar. Yesterday, the US Department of Energy revealed that last week the oil reserves of the country increased by 4.2 million barrels instead of the 790 000 estimated.

Because of these tragic events can not be excluded that investors will take on a greater geopolitical risk in their investment decisions in the oil market.

The central theme of the current situation is the monetary policy of the Fed. Since the publication of the employment report for October, the currency markets gave a high probability of a rise in interest rates at the December meeting (currently 70%). This week will be published two key indicators that will allow us to have a clearer vision of what will be the decision of the Central Bank in December (The minutes of the last meeting of the Fed and inflation).

Despite the uncertainty and tension that exists in Europe and the Middle East, the situation of the equity markets appears to be positive and after the publication of the October employment report there has been a greater propensity to risk, however this idea results from a survey prepared before the tragic events of Paris. Interestingly, this greater propensity to risk coexists with an increased likelihood of the Fed raising interest rates.

The rise in interest rates should not have a significant impact on the American economy. Considering a timeline of one year if the rates are situated somewhere between 0.50% and 1% (according to the forecasts of economists), remain at historically low levels and as such should not significantly affect investment nor recourse to credit by households. The impact of rising interest rates should feel via appreciation of the dollar. However, this movement is already embedded part in the current quotation of the American currency. The appreciation of the dollar should feel more in terms of the results of American multinationals (by decreasing the profits generated outside the US) and emerging economies.

Today will be the most important day of the Euro Finance Week, which began on Monday. The most important communication will be to Mario Draghi. In the last two weeks, the interventions of the ECB’s members have been quite a row, with investors waiting by the promise that the central bank will soon expand its quantitative easing policy. At the end of the session is not to exclude the occurrence of a selling pressure. Usually when the geopolitical risk is high, many short term investors avoid having a high exposure to the market during the weekend. Thus, if during this period occurs any negative event, they reduce their exposure to the market and as such the hypothetical negative impact on their wallets at the opening of the stock market on Monday will be limited.

At the moment, the Volkswagen scandal has not affected economic activity in Germany and it is too early that watch possible impacts originated by the attacks of Paris. The effects of terrorist attacks can only be evaluated in the coming months. However, for some sectors, such as tourism and transport, the consequences are already visible. According to the union of hotels and restaurants, last week in Paris revenues in bars and restaurants fell 44% and the occupancy rate of hotels was only 57%.

In Shanghai prudence prevailed since the new IPO’s will may lead many investors to sell shares in order to participate in such operations.

In recent weeks, the DAX has overperformed compared to its European peers. The main reason for this behavior is related to the weak expression that mining and oil companies have in the German index. The overperformance has been based on the good performance of more cyclical stocks such as chemical, automotive and industrial companies. Favoring these sectors is the fact that the Chinese slowdown have already been incorporated in the outlook of investors and the weakness of the Euro. However, in the short term, falling European currency begins to reach extreme levels, so it is not to exclude the possibility of a more technical recovery. If such a scenario materializes, the overperformance of the DAX may be interrupted.

US markets ended without major fluctuations, with the Dow Jones recording the lowest intraday variation of this year. During the first phase of the session, investors reacted to various economic data. After the reaction to economic indicators, many fund managers prepared for the Action Day of Thanksgiving that will usher in a prolonged weekend, to the extent that on Friday the session on Wall Street will be shorter, so many investors are away from their trading rooms. Today is Thanksgiving Day, which is celebrated every year on the fourth Thursday of November.

Yesterday, US markets were closed, to celebrate the Thanksgiving Day. Today, the session will be shorter, ending at 18h00 (GMT). The day is called Black Friday, which marks the official start of the Christmas Season sales, which coincides with the most profitable period of the retail chains. In recent years, with the expansion of online sales the importance of Black Friday has been losing some importance for Cyber ​​Monday. At the economic level, the Christmas sales is usually a good barometer of the mood of American consumers and as such are one of the factors that influence the equity market during the month of December. Purchases during this period are accompanied almost daily by analysts and are fairly disclosed in the financial media, by conditioning the performance of stock markets. The Association of American retailers estimates growth of 3.50% of sales compared to the same period last year. At the Statistical level since 1928, the S & P appreciated by 68% of the time during Black Fridays, with an average rise slightly less than 0.27%.