The inflation data in the United States helped calm the mood at the beginning of the session when the American session started, to the point that the Dow Jones index bounced modestly and became green. But then it continued to maintain a strong volatility. 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 lasted little and the trend turned negative coinciding with the closure in Europe.
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 Mosteyrín, 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 "For the first time more assets are withdrawn than those that are purchased.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%.
President Donald Trump believes that the disbanding is being "caused" by the rise in interest rates, to the point that during the last hours he even said that "the Federal Reserve has gone crazy". He considers that the monetary authority is being "too aggressive" in withdrawing the stimulus and believes that it is "mistaken" with its strategy. "It's out of control," he reiterated.
It is not the first time that the Republican calls into question the policy of the Fed. But it had never reached the point of insulting the institution and its president, Jerome Powell, who nominated himself to succeed Janet Yellen. His theory is that the rate hike puts a trip to his economic plan, because it raises the cost of debt. In spite of saying that he feels "disappointed", he assures that he is not going to dismiss him.