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Daily Summary with a Technology U-Turn

06744 CC Trader Talk V2

A mixed Wednesday for the European markets, with investors awaiting the Federal Reserve Interest Rate decision. The FTSE 100 decreased 0.35% with the mining sector leading the losses. The CAC 40 fell 0.35%. Technip FMC dropped 2.33%. The DAX rose 0.32%. Deutsche Post and E.ON recorded the best performances as they jumped 2.53% and 2.05%, respectively.

US Government bond prices rose today as yield slip ahead of the FED’s decision on the interest rate. Even though the Central Bank was expected to raise interest rates by 25 basis points, which has actually confirmed later on in the day. The yield on 10-year Treasuries fell 1.4 basis points to 2.1969%, while the yield on two-year bonds declined 1.2 basis points to 1.3513%. The yield on 30-year paper dropped 1.61 basis points to 2.8487% at one point.

In Europe, the yield on 10-year German Bunds, a benchmark for the euro area, eased 0.3 basis points to 0.263%, whereas the yield on British gilts of the same maturity dipped 3.2 basis points to 1.001%.

On the currency side, the euro climbed 0.59% against the dollar to sell for 1.1279, the pound gained 0.30% compared to the US currency to go for 1.2794 and the Sterling declined 0.31% against the euro to change hands for 1.1342 at the end of European markets shares trading session.

Oil prices were under pressure after the American Petroleum Institute reported an increase in weekly crude inventories. This led to a drop in share prices of multinational companies such as Royal Dutch Shell and BP Plc. Adding to this, the International Energy Agency said an increase in crude production by OPEC members, as well as other major producers was observed in May.

Technology U-Turn

The Technology sector recovered from its biggest two-day decline in nearly a year that also weighed on the broader market. Big technology names, such as Microsoft and Facebook pushed the S&P500 index higher. All markets run through a cycle but technology stock tends to be more susceptible to market volatility. In the past months, valuation of Tech companies became inelastic with unsustainable high stock prices and thus a correction had to take place. This correction may have given the opportunity to investors to buy tech stocks. This buying opportunity led analysts to think, that the recent fall in tech stock was due to psychology and not to any fundamentals so investors stepped back in and bought again.

The Calamatta Cuschieri Traders Blog is available daily on CC WebTrader. Other market coverage including coverage of the International Bond Markets is also available.

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