Stock market is optimistic
European stock indices ended the last week’s session with a moderate growth having the expected key rate increase slowed down by FED on the background. It’s not a secret that the FED’s monetary policy softening would lead to ECB key rate slowing down. The bank of Canada and the reserve bank of Australia have already taken first steps to increase their own key rates.
Nevertheless, the ECB is still aiming at reducing the gap between their key rates and those of the FED, which is clearly reflected in the index trading dynamics. Intel Corp. and Apple Inc. show it more clearly. Meanwhile the two main European indices have barely maintained in the green zone.
Last week leaders and outsiders:
DAX:
Top: MTU Aero Engines AG +3.9%, Airbus SE +3.64%, Deutsche Telekom AG +3.39%
Flop: Fresenius Medical Care AG & Co. KGaA St -8.88%, Vonovia SE -4.89%, Zalando SE -4.01%
EURO STOXX 50:
Top: KONE Corp. (New) Cl.B +5.84%, Airbus SE +4.74%, Sanofi-Aventis S.A. +3.59%
Flop: PROSUS NV EO -,05 -4.43%, Vonovia SE -3.9%, CRH plc -2.43%
Dow Jones (us 30):
Top: Intel Corp. +8.0%, Apple Inc. +6.63, McDonald’s Corp. +3.93%
Flop: DOW Inc. -1.44%, The Walt Disney Company -1.26%, Chevron Corp. -0.89%
It is still way too early to talk about global mood changes on the stock market. This Wednesday the Fed is to increase the rate by 75 bp. It is a bearish signal not only for American, but also European stocks. However, the expected comments are way more important than the report itself. If there is a signal that the American regulator would slow down the key rates in December this year, all the high risk assets are gaining support.
Bond market:
In the middle of the last week we saw a moderate decline of the 10-year yields profitability, but most of it was compensated by the end of the week. This suggests that that some investors don’t believe the aggressive phase of the Fed and ECB key rate policy is about to be over. Consequently we are yet to talk about any considerable bond profitability decline.
Oil market
China’s disappointing business activity report generates moderate pressure on the oil quotes. It is also important to take into account the USA Fed monetary policy changes. If it gets stricter, the oil prices would start to descend, which in return would press the energy sector companies’ stocks.
Considering the above, traders who work with oil and the EU or US stocks should take a high volatility risk taking place this week.
