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Moves in European session today 15.08.2018

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European stocks opened slightly higher today (15.08.2018). The currency crisis in Turkey still suppresses risk appetite among investors: the big anxiety in the market is a geopolitical escalation between Trump and Erdogan, which spills over into the European economy; after the losses in the European indices in the last trading days, however, the slightly higher open of the FTSE100, CAC40 and DAX30 is a sign that markets are assimilating the Turkish crisis, and after the initial shock is ready to return to the market. Stoxx Europe 600 also climbed, up 0,1%, its strongest gain in one week. The Turkish lira fell 2% against the dollar and euro this morning.

Market sentiment, however, is defensive. In the FTSE100 for the last two days the best-performing stocks have been United Utilities Group plc (1,6% higher for the last two days), a company that distributes water and electricity in England's North-West; as well as Severn Trent plc (up 1,24%), which offers utility services similar to UU Group's. Both are part of the most defensive market sector: utilities.

The big risk, Turkey, and the market's sentiment to the risks it poses, will dictate our views of market sentiment. Most exposed to the currency crisis are the Spanish BBVA and the French BNP Paribas: we will track them for moves higher (or a stop to the large losses) as an indicator of improving market sentiment. This will mean that the market has assimilated the risk of Turkey and finds the recent large losses overexaggerated. This will show a calming of nerves after Monday's manic session and a slight return of risk appetite among investors. The other heavily exposed bank, Unicredit, cannot be tracked today as the Italian markets are closed.

The risk of the Turkish crisis are not isolated to Europe. According to BIS data, Japanese banks have a $14 billion portfolio in Turkey, UK banks have a $19 billion exposure, and US banks have a $18 billion exposure. In Great Britain Aviva plc has an exposure to Turkey, as well as HSBC. We will track HSBC for movements: HSBC is exposed to both Turkey and Eastern Asia; both regions have experienced slowdowns in their economies and can be used as barometers for sentiment towards emerging markets. At the time of writing (10:20 Sofia time), HSBC was 0,22% up since market open.

Vestas Wind, the Danish wind turbine company is due to release results, as well as UK's Balfour Beatty, an infrastructure company.

During the Asian session stocks continued their downward trend.


 Trader Velizar Mitov
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