Anchor resume from 21 to 28 of July 2017

Anchor resume from 21 to 28 of July 2017

Ana Martínez

Comments following the meeting of the US Federal Reserve's Open Market Committee took a look at the close of last Wednesday's session. Members from the Fed reiterated the vision of a moderate economic growth and strengthening in the labor market. Particularly, the greater expansion of corporate and household investment have been highlighted. In this line, and following forecasts that inflation will remain below the target of +2% over the next 12 months, the reference rates remained within the range [+ 1% - + 1.25%] unchanged. It was also announced that rates would remain at these levels over the long term following the evolution of the economy and price rates, while the "relatively early" reduction of the balance sheet could begin.

All in all, analysts consensus estimates that it will be during the September’s meeting when the reduction of the balance sheet will begin, and rate increases are discarded until the end of the year. The effect of this on the markets has been negative for the dollar, which fell back against the euro to 1,1732 EUR/USD while the US equity indices ones registered new levels of highs.

We closed the week with the release of US quarterly GDP data that accelerated to 2,6%. As catalysts of the market we count on the publication of companies like Mc Donald's and City Bank that surprised surpassing forecasts. Specifically, 75% of the companies that have announced their quarterly results have beaten the expected profit outlook (in contrast to 58% in Europe), which has boosted the recent upswings in the main US selective.

As for the policy, the United States Senate rejected again on Wednesday the revocation of the Obamacare health system, that’s why updates on the region's policy could weigh the markets as the macroeconomic data. On its part, the macroeconomic data published has been positive so far, with PMI levels exceeding the expected rates (53,2% vs 52,.2%) and +6,5% increases in durable goods orders for the month of June (vs the +3% Expected and the previous -0.1%).

In Europe, business results resulted disappointing after posting lower-than-expected profits, notably pharmaceutical company AstraZeneca on failed anti-cancer drug trials and Spain's Siemens Gamesa, a factor that hit the benchmark indexes. In a week in which business data came to the fore, the updating of macroeconomic data was secondary. Nonetheless, we highlight the advance of the manufacturing activity, which fell to 55,8 from 56,3, which is still highly expansionary.

We emphasize the evolution of the Euro, which is around the 1,17 EUR/USD, accumulating an appreciation of approximately +11% against the US dollar this year. With this, we could expect between the short and medium term a deterioration of the economic activity data within the region since a more expensive euro in relative terms will lead to an increase in exports to the purchasing countries.

Over the next week we will closely monitor the evolution of inflation data in the Euro Zone, employment in the United States, the BOE’s meeting during Thursday, and the latest data on economic activity in China and Japan.

As key benchmarks for finalizing the weekly closing of markets, we must look at the latest rally in crude oil prices (currently trading above 51 USD/Brent), after that Nigeria announced that it was going to join the pact made by the OPEC and non-OPEC members to reduce production, and Saudi Arabia pledged to reduce its exports to 6,6 million barrels from August onwards. Also, the latest update of API inventories, fell by -10,23 million barrels favoring the rebound of the commodity.

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