EU and US futures are slightly negative but about to close a good month of October, safely away from the recent lows. The collapse of the markets in China does not seem to affect the European and US stock exchanges at the moment.
Behind the excellent performance, there are the quarterly reports. About three-quarters of the S&P 500 companies that published their quarterly earnings beat expectations in terms of earnings per share: on average, they exceeded expectations by 2.5%, well below the average of the last five years, equal to 7.8%.
The United States 10-Year Treasury Note is trading at 4.15%, up from 4.25% on Friday. Real interest rates also dropped significantly, to 1.63% from 1.80%. Inflation expectations are at 2.50%.
The Wall Street Journal wrote on Friday that the Federal Reserve would certainly raise its benchmark interest rates by 0.75%, to 4%, at the Federal Open Market Committee meeting on Nov. 2 while for the following meeting, that of Nov. 14. December, a reflection is underway on the possibility of proceeding more moderately, with an increase of fifty basis points.
The article's author is Nick Timiraos, who is believed to be the closest among journalists to the top of the Federal Reserve. When the rumors about the fifty basis points hypothesis came out in December, the futures on the hypothesis of 75 basis points fell below 50%.
My Assessment
Despite the negative news, I expect a rebound in the indices, with the recession already priced into current prices. Markets always price worst-case scenarios four months earlier.
For a rebound, I like the FTSE 100, where there is a clear boost from the Bank of England, which has announced further measures to ensure financial stability in the UK, strengthening its intervention in the long-term bond market.
The rebound is already underway, and this year we will finally have the famous Christmas rally of the markets.
Natural gas: US gas has also suffered following the collapse of European gas prices, which collapsed below 100 euros per MWh, given ever closer measures capable of containing the price.
The inventory data was also negative, with a higher-than-expected reading. This, coupled with the weather, is causing prices to plummet. The collapse was predicted in my previous articles, but now the prices are starting to be very attractive.
Europe will need even more LNG to replace Russian volumes next summer, when the continent recharges storage, while Chinese demand will recover and offset lower imports from other Asian buyers. Soon I could buy Natural Gas.
Telecom Italia (BIT:TLIT): The government is inclined to re-nationalize the group to create a single broadband network in Italy, pushing for Cdp to buy all of Telecom Italia and resell the telephony arm.
This driver could raise the stock, which is only to be bought on a speculative basis. The stock, according to my model, is worth 0.15, with the lack of profitability and high debt heavily affecting the stock.
Santander (BME:SAN): As written in previous articles, I do not recommend investing in the banking sector at this stage. Banks are exposed to downside risks from overheating residential real estate markets, with over € 4 trillion in loans and advances secured by residential real estate.
There is a risk of running into a large tide of non-performing loans. The valuation, according to my model for Santander, is 1.65. Even here, as in the case of Italian banks, there is a lot of room to go down from current prices.
Alibaba (NYSE:BABA) and JD (NASDAQ:JD).com: Market crash in China with two tech stocks hit hard. In China, the Congress ended with a replacement at the top of the party not accompanied by the announcement of measures to support growth, so these measures 'will not arrive in the period we expected'.
Although analyzing the financial statements, these two companies have a very interesting price, the usual problems of China, with the ever-present threat of nationalization of many companies as a practice of the communist system, do not push me to make long-term purchases of these companies' stock, which are at odds with the government, but to make only speculative purchases.
According to my model, Alibaba is worth $ 75, and Jd.com is $ 45. On the other hand, I have a portfolio of excellent Chinese companies with management that does not conflict with the government.