While markets hit record highs on Wednesday (Nov. 7), investors concerned about the prospects for tax cuts took the chance to get out of the equity market, pushing the markets down in the last 2 trading sessions of the week. This was probably the reaction to the news that indicated cuts might not be as deep or come as soon as expected. The S&P 500, Nasdaq, and Dow Jones Industrial Average all hit fresh highs on Wednesday, but with most U.S. companies done reporting earnings, the market may be short of reasons to continue the upward march. The S&P 500 closed at 2,582.30, leaving a weekly loss of 0.214% after touching a 52-week high of 2,597.02 on Oct. 7 and closing at 2,590.64 on that day. The CBOE index (or VIX), which is a popular measure of the stock market’s expectation of volatility implied by S&P 500 index options, closed at 11.29, as it rose by 7.52% on Friday and shot up by 23.52% (the highest in 2 months) during the week gone by.
As reported by Bank of America Merrill Lynch (BAML) to CNBC, investors poured a record $1.3 billion into funds managing tech shares over the past week. In the past week, Equity funds received a net $3.9 billion, slowing from the previous week’s $5 billion, though mutual funds witnessed $1 billion in outflow. Overall, U.S. equities suffered outflows of $5.6 billion, while Bonds took net inflows of $6.5 billion
The EUR/USD closed at 1.1665, gaining almost 0.50% over the previous close of 1.1607
The attention surrounding the Catalan affair has considerably gone down this week while markets are focusing more on earnings season.
Last Monday the November Sentix Index, that is, the investors’ sentiment index, was released, showing an encouraging 34.0, well above consensus expectations (30.8) and more than 4 points higher since last month data, while on Tuesday increasing Retail Sales data regarding September were released, showing an increase of 0.7% on a month-on-month basis and an increase of 3.7% on a year-on-year basis (consensus of, respectively, 0.6% and 2.7%).
European shares suffered their worst week in three months on Friday, as a slowdown in earnings growth and jitters in bond markets spurred profit-taking in a market that remains close to two-year highs. Leonardo was the biggest loser on Friday, falling 21.6 percent after the Italian defense contractor cut its guidance. The STOXX 600 fell 0.4 percent on Friday, weighed down by weaker industrials, one day after suffering its biggest one-day loss since the end of June. The pan-European index ended the week down 1.9 percent, its biggest weekly loss since mid-August, but remains up 7.5 percent for the year to date.
EUROSTOXX 50 closed at -1.84% compared to last week.
The German DAX closed on Friday at 13,183, losing 2.196% from the previous week, the French CAC 40 closed at 5,380 losing 2.5%, while the Italian FTSE MIB closed at 22,558, losing 1.98% on a weekly basis. The Ibex 35 reported a weekly loss of 2.56% closing on Friday at 10,092
On the fixed income side, German 10Y yield increased to 0.41 from last week 0.37, The 10 years OAT is stable in the range of 0.74-0.78%, Spanish 10Y is around 1.56% with spread over Bund of 111 basis points, but Spain announced it will reopen four Bonos next Thursday: 2021s, ’22s, ’27s and 2066s. Size range will be published on Monday.
Italian long term government debt securities (BTP 10Y) is trading at 1.85%, up 6 basis point since last week. On Tuesday the 10yr BUND-BTP spread reached the tightest level in over a year at 140bps.
EUR is stable, appreciating vis-à-vis the USD 0.4% compared to last week while the EUR Index is unchanged at 106.5
Discouraging updates regarding the Brexit drama did arrive on Thursday and Friday: European Union chief negotiator Michel Barnier raised the prospect of Brexit talks failing to reach a breakthrough by year-end, saying the U.K. has two weeks to come up with a better offer on the financial settlement.
Barnier called for “real and sincere progress” on the three divorce issues, which include the separation bill, the rights of EU citizens and the Irish border, which has erupted back onto the agenda.
GBPUSD closed the week at 1.3188, up from last week level of 1.3076, a value considerably lower compared to the year high of 1.3656. Vis-à-vis the Eurozone currency, GBP was up to 1.1311 from last Friday’s 1.1243, absorbing the loss reported after the BoE rate hike decision.
On the equity side, the blue-chip FTSE 100 closed the week losing 1.67% over the week and closing at 7,434 whilst the mid-cap index, that is, the FTSE 250, was down at 20,040 (-2.06% over a week ago).
Japan’s Nikkei 225 closed at 22.681,42 on Friday, after it won 0,63% on a weekly basis. However, mid week it was trading higher, with a high of 22.937. Topix closed the week neutrally at 1.800,44, after it won 0,3%. The Shanghai Composite Index closed at 22-month highs at 3.432,67 after gaining 1,8% on a weekly basis. Most Asian markets traded lower on Thursday and Friday following Wall Street’s concerns about the tax scheme reform. The Hang Seng Index hit 10 year highs after it posted 1.8% weekly gains and closed at 29.120,92, boosted by accelerating money inflows from Chinese investors.
Japanese Yen won 0,40% against the US dollar week-on-week, closing at ¥113,56. The Australian dollar traded lower at $0.7661 on Friday amid concerns about consumer demand, losing 0.4% week-on-week. Yen rose almost 0,7% against the Euro over the week closing at ¥132,47 on Friday.
Oil prices surged this week because of growing tensions between Iran and Saudi Arabia. Also, it is believed that the OPEC production cap agreement will be extended through 2018. Crude closed at $56,90 per barrel on Friday after it gained 2,15% in the week. Brent closed at $63,66 per barrel posting 2,43% weekly profits.
Gold at a 3-week high at $1275,6 per ounce after it won 0,45% in the week, supported by the increasing tensions in Middle East.