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Market commentary

  • Risk Manager
  • Blog post submitted on 10th June 2014

Good morning!

Given the bank holiday in some European countries and the absence of new European and US statistics, the markets continued to show their satisfaction with the ECB recent actions. The momentum was also supported by the Asian economies which brought about confidence boosting news. To start with, early on Monday, Japan revised its first quarter GDP growth from 1.4% to 1.6% (quarter-on-quarter). Later, the Chinese Central Bank announced that the reserve requirements of some banks will be cut in order to boost agricultural loans and lending to small businesses, with the ultimately view of sustaining domestic demand. Noteworthy, the news came shortly after trade data pointed to above expectations increase in exports in May but falling imports. The latest string of Chinese economic data also included the May inflation published early this morning; the figure slightly topped expectations, probably just enough to keep worries of subdued demand at bay while making the case for possible additional stimulus (since the targeted inflation is still 1 percentage point higher than the current reading).

Nevertheless, the Asian equities fluctuated as the supportive data was partly offset by the underperformance of casino operators after China took further steps to limit the use of UnionPay debit cards at casinos.

Against this backdrop, the US equities in turn continued to cling, reaching a new record while the European stocks closed generally higher; what’s more, the features are currently pointing to a positive opening. Evens so, Lloyds’ declined by 1.2% given that the price range for the shares in TSB to be sold through IPO was set below the book value (10-30% lower depending on the final price); this IPO was prompted by the bailout agreement closed with the UK authorities in 2008.

On the emerging markets front, Brazil and India were once again the better-performers reflecting to some extent the Chinese data and reserve requirement cut. Noteworthy, for the followers of the Brazilian equities, the meat producer JBS traded strongly higher after its subsidiary (Pilgrim) withdrew its bid for Hillshire. Indian equities in turn also reacted to the President’s pledge to, among others, ease business conditions by introducing a single sales tax, fast track the approval of projects, support foreign investors.

Today we are awaiting industrial production data from several European countries, UK’s estimated GDP growth for the three months ending May 31, 2014 and the number of jobs openings in the U.S.

Have a nice day!

Raluca

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