European stock markets fall by the contagion of Wall Street
The European stock exchanges reacted on Thursday fearing the precipitous fall of Wall Street on Wednesday night, which fell by 3.1%, the worst record since February. The Ibex 35 lost 1.69%, the FTSE 100 of London 1.94% and the Eurostoxx 50 1.77%, in line with the Asian Stock Exchanges. In addition, this Thursday the Dow Jones continued with strong volatility and that caused the session closed with a fall of 2.1%. Experts predict more declines in the United States due to the high valuation of the shares and believe that it will infect Europe.
The inflation data in the United States helped to calm the mood at the beginning of the session at the start of the American day, to the point that the Dow Jones index bounced modestly and became green. Prices in the United States rose one tenth in September and the annual rate remained at 2.2%, which is in line with the Federal Reserve's strategy. But the placebo effect was short-lived and dominated volatility, which caused the trend to turn negative and came to leave 2.6% after Europe closed.
In the final stretch, however, helped to reduce the tension that confirmed that President Donald Trump will meet with his Chinese counterpart, Xi Jinping, coinciding with the summit of the G20 held in November in Buenos Aires. That could open a new channel of dialogue to solve the commercial dispute between the two economic powers, one of the factors that create uncertainty among investors along with the effect of rising interest rates.
The main indicator of the Spanish Stock Exchange, the Ibex 35, fell 1.69% to 9,007.90 points, and although it remains above the 9,000 point barrier, it goes into annual lows. So far this year it has lost 10.31% of its value. Pablo Fernández de MosteyrÃn, an analyst at Renta 4, considers that these declines due to contagion are not justified on the European Stock Exchanges and, specifically, on the Spanish Stock Exchanges.
"These parquets have already had a major correction; the prices at which the shares are listed -in relation to the expected benefits-, are at a ratio of 11 times for 2018 and nine times on 2019, which are reasonable. " However, Fernandez acknowledges that if the scares continue on Wall Street, due to the problems of the trade war, they will skip the Atlantic and redden the European Stock Exchanges.
Ignacio de la Torre, partner and chief economist of the investment firm Arcano, agrees to expect more rebates in the United States "because the price of the titles are at the same height as in 1929 and in 2000", when there were strong corrections.
Puncture of the bubble
In addition, De la Torre warns that something extraordinary has happened: the Federal Reserve (Fed) has bought assets for 50,000 million, a figure higher than the 25,000 million that the Central Bank of Japan has acquired and the 15,000 million of the BCE. "For the first time more assets are withdrawn than those that are purchased. This will start to lower the price bubble. In fact, it is already happening as reflected in the 10-year bond rate rise, which has risen from 2.7% to 3.15% in a short time. So far it has been a rate hike without inflation, which has even had an impact on the German Bund. "
This economist believes that volatility will continue with a downward trend because investors demand more profitability from stocks when compared to bonds "and will not be able to reach it". In addition, De la Torre recalls that there are many robots handling portfolios of actions whose reactions "are immediate in the face of falls and, by acting all at once, accelerate the declines".
The day of this Thursday at the Ibex was the worst in four months. It closed with falls in almost all values since only three were freed - Meliá, Cellnex and Grifols-A-, and one that closed flat, Técnicas Reunidas. The most affected were the energy companies, the construction companies and real estate companies and some banks.
The euro has appreciated up to 1,157 dollars. The ECB admitted today that trade tensions could reduce confidence in the economy in the medium term. The barrel of Brent crude, of reference in Europe, depreciated to $ 80.82 and gold rose 1.24%.
The inflation data in the United States helped to calm the mood at the beginning of the session at the start of the American day, to the point that the Dow Jones index bounced modestly and became green. Prices in the United States rose one tenth in September and the annual rate remained at 2.2%, which is in line with the Federal Reserve's strategy. But the placebo effect was short-lived and dominated volatility, which caused the trend to turn negative and came to leave 2.6% after Europe closed.
In the final stretch, however, helped to reduce the tension that confirmed that President Donald Trump will meet with his Chinese counterpart, Xi Jinping, coinciding with the summit of the G20 held in November in Buenos Aires. That could open a new channel of dialogue to solve the commercial dispute between the two economic powers, one of the factors that create uncertainty among investors along with the effect of rising interest rates.
The main indicator of the Spanish Stock Exchange, the Ibex 35, fell 1.69% to 9,007.90 points, and although it remains above the 9,000 point barrier, it goes into annual lows. So far this year it has lost 10.31% of its value. Pablo Fernández de MosteyrÃn, an analyst at Renta 4, considers that these declines due to contagion are not justified on the European Stock Exchanges and, specifically, on the Spanish Stock Exchanges.
"These parquets have already had a major correction; the prices at which the shares are listed -in relation to the expected benefits-, are at a ratio of 11 times for 2018 and nine times on 2019, which are reasonable. " However, Fernandez acknowledges that if the scares continue on Wall Street, due to the problems of the trade war, they will skip the Atlantic and redden the European Stock Exchanges.
Ignacio de la Torre, partner and chief economist of the investment firm Arcano, agrees to expect more rebates in the United States "because the price of the titles are at the same height as in 1929 and in 2000", when there were strong corrections.
Puncture of the bubble
In addition, De la Torre warns that something extraordinary has happened: the Federal Reserve (Fed) has bought assets for 50,000 million, a figure higher than the 25,000 million that the Central Bank of Japan has acquired and the 15,000 million of the BCE. "For the first time more assets are withdrawn than those that are purchased. This will start to lower the price bubble. In fact, it is already happening as reflected in the 10-year bond rate rise, which has risen from 2.7% to 3.15% in a short time. So far it has been a rate hike without inflation, which has even had an impact on the German Bund. "
This economist believes that volatility will continue with a downward trend because investors demand more profitability from stocks when compared to bonds "and will not be able to reach it". In addition, De la Torre recalls that there are many robots handling portfolios of actions whose reactions "are immediate in the face of falls and, by acting all at once, accelerate the declines".
The day of this Thursday at the Ibex was the worst in four months. It closed with falls in almost all values since only three were freed - Meliá, Cellnex and Grifols-A-, and one that closed flat, Técnicas Reunidas. The most affected were the energy companies, the construction companies and real estate companies and some banks.
The euro has appreciated up to 1,157 dollars. The ECB admitted today that trade tensions could reduce confidence in the economy in the medium term. The barrel of Brent crude, of reference in Europe, depreciated to $ 80.82 and gold rose 1.24%.
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