Anchor resume from 22 to 29 of September 2017

Anchor resume from 22 to 29 of September 2017

Ana Martínez

The selective IBEX-35 and Spanish risk premia ended the week punished by latent uncertainty in 1-O. Faced with this situation, investors have decided to remain cautious while waiting to observe the direction that the call to the polls takes on Sunday.

In the Euro area, we commenced the week with news that Chancellor Angela Merkel, as expected, had been elected again in the last German elections. However, she did not obtain the absolute majority, reason why will need to form a coalition. Most notable, however, was the rise of the ultra-right-wing party, which regained its seat in Parliament for the first time since World War II.

As for economic policy, Mario Draghi in his last appearance announced that the economic recovery remained firm, and urged to maintain the monetary policies carried out. At present, rate rises are discarded, as recent statements made by ECB members pointed out. Praet advocated a recalibration of the measures implemented in order to avoid economic shocks caused by the normalization of rates, and Villeroy was in favor of maintaining the current monetary policy and reducing purchases of the EQ. What, if we take into account the published macroeconomic data, makes sense as the price level index remained weak (+ 1.5% current vs. + 1.6% expected).

To conclude with the European Outlook, we highlight the closure of EU disciplinary proceedings against Greece for its excessive deficit thanks to the tax improvements implemented, and confirming that the country's recovery is on track.

From North America, crossfire with North Korea continued, prompting investors to increase appetite for shelter assets, deteriorating equity markets. In this regard, the International Atomic Energy Agency called North Korea a new global threat, noting that the country has quickly progressed in developing nuclear weapons.

On an economic level, prospects continued to favour the American region. GDP growth rates stood at + 3.1% above expected + 3%, with improvements seen in durable goods (+ 1.7% current versus + 1% expected) and hoovering weekly requests of unemployment benefits in 272,000 applications. Against this backdrop, recent appearances by members of the Fed continued to maintain the prospect of further gradual increases in interest rates, pushing the value of the dollar to EUR 1,181 / USD and depressing the Treasury price.

Profit taking in main Asian selectives after the recent rises, motivated mainly by two reasons: the call for early elections in Japan for October 22nd, and the growing tension and cross-provocation between North Korea and the United States.

Brent Oil barrel consolidated psychological levels of 55 USD due to Erdogan's threat of cutting off crude oil supplies from Kurdistan. The underlying reason is the independence from Iraq referendum made by the people of Kurdistan.

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