World Stock Indexes Trading - page 27

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Yesterday, Asian markets were the first to react to the outcome of the American elections and as such it was in that region that the falls were more pronounced. Thus, today’s recovery was a process of convergence of the Asian stock markets to the behavior of other world indices.
 
With the renegotiation of trade agreements and the lifting of customs barriers a more complex and time-consuming legislative process, investors seem to focus more on the new President’s intention to reduce taxes, reduce regulation in a number of sectors and outline an ambitious infrastructure plan Structures. In general, these measures would have a positive impact on the economy and profits of various companies, which explains the strong rise of some sectors in Europe and the US. The interpretation of the bond market seems to be the same. US yields continue to rise with the prospect that such measures will increase public spending and inflation. Given the high uncertainty regarding the details of the new Presidency’s economic policy, markets should remain volatile. In the short term, the notable rise in stock markets over the last 48 hours seems likely to rebound.
 
Since Wednesday there has been a generalized rise in world yields, a movement that gains greater expression in those countries where public debt is high. In the short term, the rise in the US yields and the US Dollar have reached extreme levels and may therefore be corrected. The long-term trend of these two variables should be traced when the new US Presidency provides more detail on the economic measures it intends to adopt.
 
Today, the Republican Party will elect its leader in the House of Representatives. This election will be a good opportunity to assess the relationship between the party and the President. One should notice that during the campaign, several exponents, such as the current leader of the House of Representatives Paul Ryan, did not support the candidacy of Donald Trump. For President Trump to implement his economic measures requires the consensus of the Republican Party.
 
Since the election of Donald Trump there has been a strong and volatile rise in the most cyclical sectors (primarily banks, with the exception of the mining and oil sectors) and an abrupt decline in the more defensive and more sensitive sectors of state yields. Wall Street yesterday’s session witnessed a recovery in the latter sectors, and that pattern is likely to be imitated in Europe. Among the sectors that were previously penalized the oil company should be the most dynamic, as after yesterday’s valuations, crude oil continued to appreciate during the Asian session.
 
Fed Chairman James Bullard said yesterday that it is quite likely that there will be a rise in interest rates in December, unless there is some surprise. At the present stage, the money markets give a 90% probability to an increase in key rates at that date.
 
US indexes closed higher. Janet Yellen’s words and their positive impact on US bond yields reinforced the pattern observed during the so-called Trump Rally. Banking and cyclical stocks led the rise, while utilities and the oil sector underperformed. Before the Congress’s Joint Economic Committee, Janet Yellen argued that the US economy continues to expand, having accelerated after a troubled start in the year. The Fed Chairman added that “a rise in interest rates is appropriate in the short term.” This statement was more incisive than the statement from the last Fed meeting two weeks ago.
 
US indexes closed higher. Janet Yellen’s words and their positive impact on US bond yields reinforced the pattern observed during the so-called Trump Rally. Banking and cyclical stocks led the rise, while utilities and the oil sector underperformed. Before the Congress’s Joint Economic Committee, Janet Yellen argued that the US economy continues to expand, having accelerated after a troubled start in the year. The Fed Chairman added that “a rise in interest rates is appropriate in the short term.” This statement was more incisive than the statement from the last Fed meeting two weeks ago.
 
Asian markets closed higher. The Dollar dip benefited some Southeast Asian markets. Although the strength of the American currency of recent weeks favor exports, it is important to remember that several banks and companies in the region subscribed bonds in dollars. When appreciated the Dollar, increases the the debt amount of these institutions, many of them with a high financial leverage. In Japan, exports declined for the 13th consecutive month, signaling the loss of competitiveness of their companies (due to the appreciation of the Yen during 2016). Imports also declined, partly because of the strength of the yen (which decreases its value) but also because of weak domestic demand.
 
As they hit new highs, US indexes force fund managers to follow the rise and buy stocks. Before the election, although discounting a victory by Hillary Clinton and having a misperception of the consequences of a remote election of Donald Trump, several fund managers had taken a defensive stance in their portfolios. Now, faced with the appreciation of the main indices, these investors have to take a more aggressive position, allocating a larger portion of their portfolios to the stock market.
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