Global stock markets still under pressure

After such a limited start ephemeral opening for the major European stock exchanges, the depressed quickly reasserted itself and most have increased their losses at midday, before limiting a bit sensitive.

Around 11:00 am, Paris lost 1.20%, Frankfurt 1.24%, Madrid 2.06%, Milan 1.80% and 0.90% London.

For its part, the New York Stock Exchange opened sharply lower, losing around 1%.

The day had started with the meltdown of the Tokyo Stock Exchange to 5.40% at closing. Japanese investors sought refuge in the yen sharply higher, gold too, taking advantage of the general quest security.

“Volatility prevails over the logic,” notes John Plassard at Mirabaud Securities.

“Between depressing news on oil and banking stress, Heart Balance investors,” he observes.

Multiple factors depress markets, among persistently low oil prices, sluggish economic indicators now and fall in banking stocks.

“If investors were hoping for a quiet week,” especially because of the closure of the Chinese market for the New Year celebrations, “the awakening has been very brutal,” noted Michael Hewson, analyst at CMC Markets.

Concerns have focused in recent days on the banks as from the beginning of the year the market was looking almost exclusively as the price of oil.

The International Energy Agency (IEA) has nevertheless defeated in Tuesday dent hopes of a rise in price of oil in the short term, confirming that the world should remain submerged black face a delicate gold demand.

Beyond petroleum, “the stress on the banking sector is becoming increasingly important and the risk of spread is present,” warns John Plassard at Mirabaud Securities.

Bank stocks suffered, as before. Deutsche Bank lost 4.20% in Frankfurt, Intesa Sanpaolo and Unicredit 6.07% 7.90% in Milan despite a net profit down but better than expected in 2015, and 3.96% Societe Generale in Paris.

Coordination of G20

The sector “is facing many problems,” including lower profits, a slowing global economy and negative rates throughout the planet, thereby reducing their ability to improve profitability at the time the regulations require them to strengthen their equity, explains Mr. Hewson.

“It is simple enough to understand that they can not do everything at once,” according to the analyst.

Deutsche Bank, Germany’s biggest bank rolled stock market in recent weeks, was also seen in the obligation to publish a statement intended to reassure investors about its ability to pay its debts.

Similarly, Benedict Coeuré, Executive Board Member of the European Central Bank (ECB) tried to extinguish the fire, noting that the uncertainties that threaten the global economy does not come from the eurozone.

He hoped coordination of the G20 countries, who meet at the end of the month in Shanghai, “the face of almost total depreciation of emerging currencies to limit the risk of contagion in the global economy”, recall the strategists Crédit Mutuel-CIC.

Investors questioned in effect on the ability of central banks to act in this degraded global economic environment.

The ECB should probably be in March but the US Federal Reserve (Fed) that concentrates the attention for now, while its president Janet Yellen must speak before Congress on Wednesday and Thursday.

The market was so far convinced that the Fed was going to be very patient before rising again Rates but the latest report on US employment featured some good news that perpetuate confusion about the future of monetary policy.

For its part, the bond market moved slightly as investors had rushed Monday to less risky assets such as German debt with borrowing rates had fallen sharply.

On the foreign exchange market, the euro rose against the greenback at 1.1263 dollar.

Finally, gold, real barometer of fear in the market, stabilized at 1,190 dollars per ounce after climbing the day before, a sign of investors’ caution.

 

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