The week at a glance : The calm before the Fed meeting

Last week, the trend was slightly up to flat in most of the markets. In expectation of the Fed output of Wednesday’s 15th Fed meeting, the markets were rather calm and the VIX – which measures the S&P volatility – stays low.

The Dow Jones did not stay at the 21’000 points it reached at the beginning of the month after Donald Trump’s speech at the US Congress and closed below this barrier.

On Tuesday the European banking sector slipped due to Deutsch Bank’s increase of capital for 8.5 billion in equity sale. Still in the banking sector, Life Standard purchased Aberdeen. The wave of purchase went on with the French Peugeot purchasing the German Opel which creates the second largest car manufacturer of Europe.

The mascarade of the French election is ongoing and pushed the French 10 years government bond higher as a sign of stress and widening the spread between the French and the German 10 years.

Meanwhile in the United States, Republicans unveiled their new draft to repeal the Obamacare.

On the technology side, Snap literally plunged after a sharp surge on the day after its initial public offering. As a reminder, the application creates temporary pictures and pictures with animal ears. It was capitalised for 35 billion of Dollars at the highest peak although the fundamentals were questionable. As a result the share ended at USD 22 at the end of the week.

On Tuesday, Mario Draghi announced – as expected- that he will not increase interest rates.

The 2% inflation target has been reached but this data includes volatile components such as oil prices, and the recent increase explains this figure. Even though, the BCE will focus rather on the core inflation because that number does not take into account any volatile component. It is an indicator more reliable of a long term inflationary pressure.

Last week oil slumped under the threshold of 50 dollars. Investors were worrisome about a strong increase in US oil stocks of WTI (light sweet crude traded in the NYMEX). As a domino effect, this decline sent major oil stocks down.

On Friday the, jobs creation report went out above expectation with 235’000 new jobs instead of 189´000 expected. Unemployment rate was at 4.7 percent.

In conjunction with other good macroeconomic data released recently in the USA, the consensus is confident on an interest increase on Wednesday.

Meanwhile the Fed’s decision – of increasing the interest rate or not – the 10 years went above 2.60 and the US dollar weakened and this morning traded at 1.07.



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