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Earnings season is over and in the tech sector we observed important market reactions: the most notable one was AAPL 10% depreciation caused by its disappointing results. The hedge fund manager Karl Icahn expressed a bearish view on US stocks for the medium run and closed its position on Apple, stock he owned since 2013 for a value of more than 4bn dollar.
The S&P 500 technology sector has fallen about 4% this week alone; on the other side companies like Facebook and Amazon had an outstanding performance with a weekly rise close to 7%.
On Thursday GDP growth for the first quarter registered a disappointing result of 0.5% falling short of its 0.7% forecast. During the week S&P500 fell by 1.5% even with the accommodative decision of the federal reserve of postponing the rate hike and maintaining the 0.5% current interest rate.
Volatility registered by Vix index had a 11.5% rise during this week.
In Europe macroeconomic data have been particularly positive with a Q1 growth rate of 0,6%, helped by France surprisingly good performance. Inflation still has problem surging and, also for this month, the CPI is stuck at -0.2%.
A bearish market has been the characteristic of this week and Eurostoxx50 reacted heavily to US data and lost 3.6%, having a particularly hard day on Friday.
From FX perspective, EURUSD has been particularly volatile surging from 1.12150 to 1.14020 registering a net appreciation of 1.6%.
A shift in market expectations over Brexit gave the Remain camp momentum and led GBP/USD higher for the week, ending strong at 1.46. The shift was triggered by President Obama’s comments last Friday warning of the negative impacts if Brexit happens. Markets are following polling data closely, as the June 23 referendum nears.
Despite the positive sentiment, the FTSE 100 ended the week down 1.3%, at 6,241.89, due to unimpressive earnings. The declines were led by leisure and hospitality stocks, in response to a third profit warning from Restaurant Group. Miners continued to perform well on the back of strong gold and copper prices.
UK GDP predictions showed a slowdown of growth to 0.4% in Q1 from 0.6% in Q4 2015. YoY GDP came in above expectations at 2.1%, at the same level as Q4. Consumer confidence decreased to -3 from 0 for the previous two months, as there continues to be uncertainty over how Brexit will affect the British economy.
Rest of the World
On Friday, the Chinese central bank fixed the yuan 0.56% higher, setting the mid-point to 6.4589 to the U.S. Dollar. The Shanghai Composite Index retreated slightly but ended the week at 2,938.32, more or less where it started. Moreover, Chinese debt has reached 237% of GDP in Q1 as the government continues to lend in order to support short-term growth. Fears that the economy is at risk are growing as net borrowing has surged in the first three months of 2016. This week, the government passed a law, enabling police to monitor foreign nonprofits, in an attempt from the Chinese government to limit foreign influence.
The Bank of Japan meeting concluded without additional stimulus, despite the economy’s fall back into deflation for the first time since 2013. The yen surged up 3% to 108.2 against the dollar, and appreciated further to 106.92, ending at 107.29 on Friday. There is continued uncertainty in markets over whether a further strengthening will trigger official intervention from the BoJ. Nikkei 225 fell 3.61% on Thursday, on the back of yen strength. Stock markets will be closed the upcoming nine days for national holidays.
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