February 9, 2018
Asian markets are down following the negative closing of Wall Street. China leads the losses
Asian equities fell on Friday, February 9, following the U. S. indices that suffered heavy losses in the last session.
The Japanese Nikkei 225 fell by 2.51 percent, with losses in most sectors. Automotive, finance, manufacturing and technology manufacturers were firmly quoted in negative territory.
The Yen climbed to a four-month high against the Dollar, as global stock markets plummeted again, pushing the safe-haven currencies higher.
The markets in Greater China were equally pessimistic. The People's Bank of China announced Friday that it put nearly two trillion yuan in liquidity, some 316.28 trillion dollars, into circulation to meet demand for cash before the Lunar New Year holiday season.
Worsening risk sentiment and increased volatility also means that many traders are forced to close their existing positions rather than make new bets.
The fearful sentiment that gripped stock markets earlier this week resurfaced on Thursday as U. S. equities fell to a two-month low with concerns that rising interest rates will slow economic growth. The Dow fell by more than 1,000 points and the S&P 500 sank by 3.75 percent. The Cboe Volatility Index was more than double its level a week ago.
Oil prices in the U. S. fell for the sixth consecutive day on Friday after Iran announced plans to boost production. U. S. crude oil production is at an all-time high. This is not in favour of the cuts proposed by OPEC and Russia. The downturns are taking place amid a fall in global equity markets as inflationary fears take hold of investors.
Gold remained stable on Friday amid the slump in equity markets, but a stronger dollar and concerns about global interest rate hikes dragged prices down. Spot gold fell more than 1 percent during the week and is heading towards its second consecutive weekly loss due to the recovery of the US dollar.
European markets are expected to open Friday's session on the downside.
Wall Street increases its declines
Wall Street increases its declines and volatility continues to play a leading role.
Sales on Wall Street rose on Thursday, January 8, after a mixed opening in the fourth day of a week that will go down in history due to the sudden rebound in volatility on the New York Stock Exchange. The Dow Jones is down 0.8%, the S&P 500 is down 0.5% and the Nasdaq is down 0.5%.
These movements, which haven't been seen in New York indices for more than a year, have made traders nervous. Above all because they have reminded the financial community that stocks are still risky assets.
The volume in the American indices has surpassed $9 billion in each session, something that has only happened once again in the last seven months.
The European Central Bank, like the other banks, which are always optimistic on the outside, projects positive economic developments and rising inflation for the coming years. The problem is the estimated amount of the price increase. The CPI will probably not even reach the famous 2% threshold by 2020.
The ECB's QE will remain alive until at least September and then start to consider normalising interest rates. At that point the uncertainty will be complete and doubts will arise about the ability to normalize types without causing collateral damage.
U. S. Weekly Unemployment Data better Than Expected
The consensus expected initial unemployment claims to rise slightly to 232,000, but they have dropped to 221,000. Continued requests have remained below 2 million.
At the corporate level, electric car maker Tesla Motors fell 2% after posting $675 million in losses in the last quarter of the year. Tesla closed the year with a loss of 1.96 billion dollars, almost three times that recorded in 2016.
Although the main protagonist of the session is Twitter, which shoots 25% after presenting benefits for the first time. The microblogging social network has earned 91 million dollars in the last quarter, after increasing its revenues by 2%.
Currencies and raw materials
In the foreign exchange market, following the peak of the euro since 2014 marked on 25 January at 1.2536 dollars, the European currency appreciated 0.11% to 1.2277 dollars, after depreciating 1% against the dollar on Wednesday.
In the commodities market, West Texas oil falls by 0.3% to $61.59 per barrel. Brent crude oil also fell by 0.6% to $65.05 per barrel, after hitting a record high of $71.28 on Jan. 25 from December 2014. The ounce of gold rose by 0.13% to $1,316, after peaking since 2016 at $1,370 on 25 January.
New ten-year bond increase
Wednesday's downturn in the markets coincided with a further rally in 10-year bond yields above 2.8%. This rebound, in turn, came when the Senate approved the federal budget for the next two years, which includes an increase in spending of $300 billion. The most noticeable ones will be Defence and social and educational projects.
Next week, U. S. inflation data for January will be released, which has become incredibly important to investors around the world. The reason for this is that the inflationary pressures identified in last Friday's Employment Report were the excuse investors have used to collect the large profits accumulated in recent months.
Higher-than-expected inflation will extend volatility, and is likely to cause another correction, while lower-than-expected data will be positive for risky assets.
Germany's trade balance shows that its economy is improving
Germany's trade balance in December maintained the surplus, although it declined. It goes from 22,300 million euros to 21,400 million euros. It's above expectations, which were 20,400.
Exports are far better than expected, rising by 4.1% in the previous month to 0.3%. It is much better than a -1% drop that was expected.
The most important thing is imports, because if they grow by 2.3% they continue to grow by 1.4%, which is much better than the expected -0.5% drop. Imports are very important because they warn that domestic trade and consumption are very good. This data supports the information that Germany's growth prospects for 2018 were set to rise.
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