Market View; World Stock Indexes & Trading Journal - page 14
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The rise in the stock markets was supported by Yellen’s statement (and the consequent reaction of US markets) and also the appreciation of the ruble against the dollar.
The FED introduced the concept of “patience” in its statement by stating “that could be patient regarding the beginning of the standardization process of its monetary policy.” However, the big surprise was that the Central Bank has derived the expression “for a considerable period of time” when referring to keeping interest rates at historically low levels. Additionally, when questioned by financial journalists, Janet Yellen said that the FED would not, raise interest rates at least the next two meetings. Considering that the first two meetings held in January and March, the Fed will not raise rates before April 2015.
Another positive factor that emerged from the meeting was that the Central Bank estimated that at the end of 2015, the reference rates are between 1% and 1.25%. Previously, estimates ranged between 25.1% and 1:50%. Thus, it is concluded that the FED provides that the pace of increases in interest rates will be lower than previously expected. With regard to economic projections, the Central Bank predicts that unemployment stands at 5.25% in the end of 2015 (5.50% was the previous projection) and inflation in 1:30% (compared with 1.70% previously).
In short, the outcome of yesterday’s meeting took more positive contours than investors expected. On the one hand, the timing and the pace of rising interest rates will be benevolent to the financial markets and on the other hand the statement significantly reduced the uncertainty hanging over the future of US monetary policy. These factors combined with the state sold on American indices justified the strong positive reaction of the shares on Wall Street. Considering these factors and the very positive statistical seasonality of American markets during this period of the year, it is not excluded a recovery over the next days. Indeed, the past 28 years, the period that includes the last five sessions of the year and the first two of the new year, the S & P had a positive performance 25 times with an average gain of 1.74%.
The European indexes opened up, a day after they have presented a significant increase in their valuation. Yesterday’s behavior was due to the statement of the US Federal Reserve made the day before. European markets continue to be positively influenced by American indexes but the situation in Greece and Russia as well as the evolution of oil will continue to haunt investor sentiment.Today is expiration date for futures contracts and options on European indexes. Generally, the expiration days of futures and options are more volatile and likely to be performing erratic movements. The most critical periods are the interval between 10h50 and 11h00 (for futures and options on the Eurostoxx50) and 12h00 (for futures and options on the DAX).“Do not fight the Fed!”. This old Wall Street aphorism advises investors not contradict the Federal Reserve. In fact the echo of the statement from the Federal Reserve was felt in yesterday’s session, with major stock indexes registering gains of more than 2%. Monetary policy has been the most important variable to influence the course of the stock markets in recent years. In addition to not having removed the words “for a considerable period of time”, the Fed reported that the interest rates should not suffer increases before mid-2015, removing the uncertainties that the market had in relation to its timing.Leading indicators of the economy, anticipating their cycles in 6-9 months increased 0.60% in November, foreseeing a dynamic economy in the coming months.In US markets, the session will also be influenced by the expiration date of futures and options, which should be reflected in an increase in volatility. The most critical moments are the opening and 19h00.Japan’s Central Bank maintained its strong stimulus and presented more encouraging outlook for the country’s economy.
Stock markets are trading high, giving extension to the recent rise. At the present time there is a favorable environment generated by the FED’s statement, which is now enhanced by the reduction of threats posed by a number of factors. In Asian markets, crude oil traded higher, as Saudi Arabia argued that in 2015 the oil prices will recover due to a more dynamic world economy. The recovery of oil spread to other raw materials, thus it’s expected a recover in oil and mining sectors, at least in the short term. In the currency market, the ruble also recovered against the dollar.
Tomorrow starts the period that corresponds to the so-called “Santa Claus Rally”. This period includes the last five sessions of the year and the first two of the new year. Over the past 28 years, the S & P had a positive performance 25 times with an average gain of 1.74%. However, as the S & P already appreciated 6% in the last four sessions, it is likely that the Santa Claus Rally this year has already been at least partially anticipated. There is a pattern that has repeated in the last 30 years, during the month of December. This pattern consists of a rise in major indexes during the first 8-10 days of the month, a decline in the interim weeks of the month and the occurrence of “Santa Claus Rally” at the end of the year. So far, this standard has been met.
Take a break, enjoy the winter holidays and spend some quality time with families and friends.
Wish you all a Merry Christmas and a Happy 2015!
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Today the stock markets traded with minor variations.The week will be shorter than usual, due to the closure of markets worldwide on 1 January 2015. Many investors are taking advantage by using vacation time and equity trading volumes are more subdued than usual.The attention was mainly focused on Greece. The Government once again fails to elect the President of the Republic, which brought some panic among investors, since this failure results in the holding of early elections. The Athens stock exchange fell as more than 12%, but closed with a lower fall to 3.5%.The main US stock markets closed the session on Monday in a mixed record, with the SP 500 at new highs and the Dow Jones declining slightly.
The beginning of 2015 should be marked by political uncertainty in Greece, the economic and financial situation in Russia and the continuous oil price weakness.
Take a break, enjoy the winter holidays and spend some quality time with families and friends.
Happy trading and a Happy 2015! :-)
American indices closed lower on the last day of the year, breaking the upward trend started in mid-December and that allowed the S&P to appreciate 8% in 6 sessions. Falling US stocks may be explained by a number of factors. The first is that many fund managers, who were able to follow the positive performance of the US stock market during 2014, realized capital gains, thereby creating selling pressure. This trend was particularly visible in the utilities sector, which was the best performer of the year with a rise of 24,28%. The second is that other investors materialized, for tax purposes, capital losses which had in some titles. The third and final reason was the fall of the oil traded in New York, who led their sector to a loss of 0.80% in the session, accumulating a decline of 10% in 2014, which deeply contrasts with the recovery of 11,40% of S&P. The effect of these factors was boosted by the lack of liquidity typical of this season. The economic data did not have any impact on the session. Today, many investors are still on vacation, so the volume should be reduced. Still, the publication of economic data, including the ISM index, which measures manufacturing activity in the country, should be closely monitored.