October 3, 2018
Asian Markets mixed despite Dow's bullish record
Asian markets show a mixed tone on Wednesday, October 3, after the historic high of the Dow Jones Industrial Average on Wall Street.
The Nikkei 225 fell despite the fact that Japan's economy is improving and, at the moment, is not subject to the trade war waged by the United States. In Australia, the ASX 200 expanded profits, supported by gold mining companies. In Hong Kong, the Hang Seng index fell in the early trading hours.
On Tuesday, the Dow Jones Industrial Average reached record highs, boosted by Intel earnings and optimism about global trade. The trend began in the previous session, after Canada joined the United States and Mexico in a new trade agreement. The new agreement will grant more market access to U.S. dairy producers, while Canada has agreed to limit automobile exports to the United States. Market reaction suggests that investors are less worried about the trade war now.
The dollar weakened during Wednesday's Asian trading session. Italy continues to have a negative influence on the euro, after Claudio Borghi said that most of the country's problems would be solved if it regained its own national currency. Later the Italian Prime Minister, Giuseppe Conte, said that the euro is indispensable.
On Wednesday, oil prices fell due to the release of U.S. oil inventories that reflect an increase in production. Despite this, prices remain close to the four-year high before U.S. sanctions against Iran's oil exports, which will begin next month.
The price of gold rose in the Asian session on Wednesday, after gaining more than one percent in the previous session. It has been driven by demand for safe-haven assets, as Italy's budget plan represents a possible clash with the European Union.
European markets are expected to open Wednesday's session downwards.
Moderate falls on Wall Street
Moderate falls on Wall Street after Monday's rally.
Wall Street recorded moderate falls on Tuesday October 2 after Monday's rally and while the market reacts to a new episode of trade war between the U.S. and China.
Trade tensions between the two largest economies in the world are still latent and the Pentagon has cancelled this Tuesday the visit of the U.S. Secretary of Defense, James Mattis, who was going to visit China this month.
In addition, the United States is also suffering from tensions in the Old Continent, due to the political situation in Italy, which is trying to move forward with a budget with more deficit than those allowed by Brussels.
Problems in Europe due to increased tension between Italy and the other European partners
The Italians want to maintain a deficit in the 2019 budget above what European rules dictate.
Moreover, comments that everything would be all right if Italy had its own currency have put the euro under more stress. Subsequently they had to rectify by saying that 'the Euro is irreversible'.
According to Salvini the attacks from the markets do not come because of the strong deficit assumed, but because of Brussels' complaints against the deficit. Borghi for his part says that a deficit of 2.4% is not revolutionary.
The Italian politicians, who do not stop making statements, do not mention the deficit of 130% of GDP which is the second largest in the Eurozone, after Greece and a long way from all other countries.
Federal Reserve Chairman's Intervention
Powell's statements will focus on employment and inflation forecasts.
At the economic level, on Wednesday the evolution of the services sector will be known and the employment data for September from the consulting firm ADP, which is a preview of the official Employment Report that will be published by the U.S. government on Friday.
The consensus expects wages to recover at a year-on-year rate of 3%, the unemployment rate to fall to 3.8% and the economy to create 188,000 new jobs.
Raw materials market
Oil is trading flat and close to its 2014 highs.
It is doing so in the face of imminent US sanctions against Iran, which will come into effect next November.
The West Texas barrel rose 0.2% to 75.49 dollars.
In the currency market, the euro is depreciating by 0.32% against the dollar.
Europe falls strongly in the face of Italy's constant challenge
A member of the Italian executive, Claudio Borghi, the economic director of the Northern League has said that 'a currency of their own would solve their problems'.
Subsequently they had to rectify. Conte says that the euro is Italy's currency, that it cannot be renounced and that any opinion against the euro does not agree with the government's position.
The reaction to Borghi's words, which tighten the string even more, has not been long in coming. All European stock markets have been bearish.
In addition, Italian bond yields have marked levels not seen since 2014 and the Italian risk premium reaches five-year highs.
The European Community has begun to prepare a response to Italy
They prepare the ground for rejecting the 2019 budget, designed by the Italian populist government.
The commissioner of Economic and Financial Affairs, the French socialist Moscovici, stated that it is not in Italy's interest to continue accumulating debt and that the Italian government should tell the truth to its electorate.
His affirmations were answered by the Italian Executive. The leader of the Five Star Movement and vice-president of the government, Di Maio, stated that there was no reason to question the 2.4% deficit.
This story has only just begun and will probably become a headache for the Eurozone in the coming months.
It is not known to what extent this crisis could change the European Central Bank's plans to withdraw its stimulus, but it is certain that they will analyze it in detail.
[image] The exchange rate is always given for a currency pair. A currency by itself is worthless if it is not compared to another currency or other reference, such as gold. Therefore, whether in a flexible exchange rate or fixed exchange rate...
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