Market's evolution 08 of February to 12 of February 2016

Market's evolution 08 of February to 12 of February 2016


Fear seized markets last week, apparently we did not bottom out after the corrections reached over -10% suffered in the markets so far this year. No doubt, uncertainty about the many opened fronts and the inability of central banks addressing existing turmoil, led many managers and economists brewing for a new crisis.

Apparently managed the landing of China which appeared to be weaker than expected, the profitability of the banking sector started to concern invertors due to the interest rates close to zero, the slow growth and the large numbers of entities that did not comply with capital requirements imposed by MiFID. This fact aggravated the already high levels of volatility in the equity markets.

The refugee crisis and the inability of reaching agreements on further cuts of Eurogrup with the Troika in Greece, made premiums of those peripheral countries go up during recent sessions. However, the TIR of the German Bund kept minimum levels.

In the North American continent, the situation was not much better. Janet Yellen, president of the Fed in his appearance before the House and Senate diverted attention since references to the overall macroeconomic situation may directly affect monetary policy decision to be taken at the next meeting of the Fed in March. It’s important to highlight that there’s possibility of slowing down the rate hikes if the economy does not evolve as expected and this decision will again depend on the employment data and price levels.

As for macro economy is concerned, Goldman Sachs cut estimates of GDP from + 2,25% to + 1,75%. The drop in leading indicators data services and the weakness of the manufacturing sector due to the decline in demand, could be pointing towards a slowdown in the US economy.

No references in Asia after the Chinese New Year celebration, we will look at the evolution of the levels of imports and exports for January to be published throughout the day on Monday.

Despite the rebound staged assembly equity markets on Friday, the weekly closures resulted in sharp declines for the main indices, especially in the case of the IBEX 35 with cuts -6,80% and below support levels of 8.180 ending its upward trend. In the US the closures were not that dramatic, with the Dow Jones which provided the largest decline (-1,43%) closing at 15.973, while the S&P500 remained with deep cuts in 1.865. By contrast, in Japan Nikkei225 starred cuts of -11% putting an end to a bullish market of five years, now at 14.952 levels. Without much to highlight from China, we will be looking at its evolution after the week-long celebration for the new year.

As for the currency market is concerned, there were slight gains of EUR over the dollar and the pound. It is worth mentioning however, the strengthening of the Yen, a factor that could affect negatively affect to the Japanese economy as Japanese goods would become more expensive for other countries due to currency effects.

As for commodities, Brent continued maintaining levels above the 30 USD/Brent, while gold rallied +5.50% closing at levels of 1.237 USD an ounce of gold being this one of the best performing assets so far this year.