Market's evolution 05 of September to 09 of September 2016

Market's evolution 05 of September to 09 of September 2016

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Throughout the week we have witnessed many ups and downs in the markets waiting for a new interest rate decision and the announcement of monetary policy agreed by the European Central Bank. But it was not until Friday evening when, after a few comments Eric Rosengren from the Fed pointing out to the overheating from the US economy, that the markets turned downward.

Although the support shown by various members from the ECB to implement major easing measures (including a new rate cut), the reference rate as well as the deposit rate were kept unchanged at 0% and at -0,4% respectively. However, growth expectations for next year were reduced expecting to grow at rates of +1,6% in 2017 (revised down from the previous figure of + 1,7%). In the same vein, the latest economic data updated was mixed; while retail sales and confidence levels rebounded, the leading indicator of activity contracted until 52,9 compared to the previous estimates of 53,3. So, doubts about the direction of the economy are still on the spotlight.

In the UK however, we are facing what looks like a revival of the economy following recent rises in house prices and activity levels in the services sector. In contrast, companies like JP Morgan warned about the transience that improved macroeconomic data could have, depending on the evolution of the negotiations regarding the Brexit.

Against this background, the selective closed with widespread cuts with the exception of the IBEX 35, which managed to remain at levels of 9.025 (+1,31%). By contrast, the German DAX closed around the 10.573 (-1%), while the STOXX50 did so around levels of 3.053 with slight cuts (-0,86%).

In the United States new signs of weakness penalized the dollar, now trading around the 1,12 EUR/USD. A lower activity in the service sector discounted a lower chance of rate hikes for September’s meeting, while recent employment data surprised to the upside with the creation of 5,871 million of JOLTS jobs.

American selectives failed to maintain the gains recorded in recent sessions. The new statements made by some Fed members quickly turned down the US indices discounting a close rate hike. Falls were close to -2,40% and led the major selective to close at 2.127 levels on the S&P500 and at 5.125 in the Nasdaq Composite.

From Asia we highlight the new rumors about the possibility that Japan could be considering making a new cut in the interest rates in the face of the inability of reviving the economy. The main selective closed flat without significant changes.

As for commodities, we were awaiting for the meeting of the G20 where, despite the expectations, not quantitative agreements were reached. And although the Russian minister was opened to discuss a freeze in production, those proposals did not finally materialized. Even so, this seemed to encourage the Brent price, but it was the sharp drop from oil inventories what turned up the commodity with rises of +2,52% close to the existing resistance levels at the 50 USD/Brent.