Euphoria of the Markets Hanging by a Thread

Euphoria of the Markets Hanging by a Thread

They have, in any case, been essentially continuing to raise the world’s stock markets during the past week.

The increases are not great, but still show a certain optimism. Including the United States, where indexes are back to their highs.

The S&P 500, with a total of more than 2030 points, surpassed its previous record of mid-September. As for the Dow Jones, the other benchmark index of Wall Street, it also reached the highest ever at over 17,500 points, nearly 10% above their low in mid-October issue.

“Investors were reassured by good US data, including gross domestic product (GDP) in the third quarter,” said Renaud Murail, manager at Barclays Bourse. Published October 30, the number of US growth was 3.5% above annual rate between July and September, according to the first estimate of the Department of Commerce.

After rising 4.6% in the second quarter, it is the best performance over six months since 2003. This confirms the upturn in the US, after three weeks of focusing on fears of resilience of the US economy receiving the disturbing signals from the Old Continent.

According to the official data published on Friday, November 7, the US unemployment rate swooped down in October, although new jobs appeared to fewer than in September.

Wall Street also welcomed the Tuesday outcome of the midterm elections that changed the Senate – and therefore the Congress as a whole – in favour of the Republican camp, known to be more business-friendly than the Democrats.

Finally, business publications have proved comforting. “In more than three quarters of the cases, they were better than expected, higher than the historical average,” said Mr. Murail. Media giant Time Warner or credit cards specialists Visa and MasterCard were such a pleasant surprise.

In Europe, the development of major exchanges was more mixed this week. The CAC 40 fell 1.02% in five days, while the DAX lost 0.38% and the FTSE progressed 0.32%.

On the other side of the Atlantic it is Mario Draghi, President of the European Central Bank (ECB), who is to be thanked. Charismatic Florentine businessman who challenged the Board of Governors of the institution, appeared relaxed and smiling on Thursday at the monthly press conference of the ECB.

“Draghi managed to regain his will on the markets,” Mr. Murail appreciate. Despite being made a scapegoat for the fact that he clarified the subject of the liquidities injected into the economy – 1,000 billion euros that will inflate the ECB’s balance sheet, successor to Jean-Claude Trichet has been popular with investors.

They have become convinced that if inflation were to falter even more clearly in the euro area, the ECB is ready to do more to revive the economy, including by hitching the redemption of corporate bonds.

However, the carefree spring feels far away in exchange. “The markets will continue to visually navigate in the weeks to come. They are able to turn the most complete euphoria to deep depression, as we saw three weeks ago, “warns Mr. Murail.

“The resumption of sustainable uptrend market will not happen with the credibility of growth return in Europe, which is expected to take time,” reminded the analysts at CM-CIC in a note on Friday.

European markets are already well recovered (13.8 times net income) in relation to the growth prospects of their companies. Even if they are mostly in the red since the beginning of the year, while the S&P 500 was up more than 9% since January and the Nasdaq soars more than 10%.

Seeing that the market weather is getting worse, several IPOs were postponed in Europe. Among these were transactions for which a minimum of market visibility is essential, the French company of specialist clothing Elis, which was supposed to raise some 700 million euros at the Paris Bourse.

It is now obvious: investors are more nervous they are willing to admit.

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