Markets ignore the inflation

Last week ended with a moderate growth of key European stock indices. However, with the session’s start this Monday we see a splash of trading activity without any unidirectional price movement. Uncertainty is always bad for the stock market. Moreover, there’s moderate growth in the 10-year yields profitability which is also a bearish sign for stocks and, consequently, stock indices.

Last week leaders and outsiders:

DAX:

Top: Münchener Rück AG +3.69%, Hannover Rück SE +2.75%, Deutsche Börse AG +2.26%

Flop: adidas AG -9.53%, PUMA SE -7.29%, Zalando SE -3.16%

EURO STOXX 50:

Top: Münchener Rück AG +4.13%, ASML Holding N.V. +3.79%, SAP SE +3.14%

Flop: adidas AG -4.83%, L’Oréal S.A. -3.57%, EssilorLuxottica -2.22%

Dow Jones (us 30):

Top: The Travelers Companies Inc. +3.78%, Goldman Sachs Group Inc. +2.17, Johnson & Johnson +2.07%

Flop: American Express Co. -7.94%, Verizon Communications Inc. -6.48%, Nike Inc. -2.76%

Have a closer look at the outsiders; Adidas, Puma, Nike and Zalando are among them. This may be due to reduced buying activity with rent and energy carriers’ prices skyrocketing on the background. Considering these expenses are unavoidable, there’s a risk these companies’ stocks would go down further.

Bond market:

European 10-year yields profitability reduced insignificantly. Thus there’s still risk of buyer activity elevation. Moreover, it is important to take Japan’s yields into consideration. In this case we would see the US dollar falling which would consequently make the market more volatile. This is applicable not only for the foreign exchange market, but the capital market too. An increase in Japan’s yields profitability would make the yen nominated assets more attractive, even though the yen has suffered this year. This would reduce the investments into the US and Europe.

Oil market

The week’s start wasn’t the best for the oil market. China, the biggest importer and consumer of oil has reduced its import by 2% p.a. No panic, but a risk of further reduction is still present.

Oil sales aren’t that big, though they would reduce the energy sector companies’ profitability.

Data on Germany and the UK’s business activity in manufacture applies extra pressure on oil. In both cases the values are below 46 points, ending up considerably lower the previously predicted ones. As a conclusion, energy carriers demand is going down.