Market's evolution 09 of January to 13 of January 2017

Market's evolution 09 of January to 13 of January 2017

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Donald Trump's statements last Wednesday monopolized investors' attention. The interest about the policies and measures that will be implemented by the US president and the expected effects of those on the economy meant that many of us were eagerly waiting for the retransmission of the speech.

Contrary to expectations, the influential businessman's words disappointed the spectators who expected to know the measures to be implemented in terms of fiscal policy and the creation of new infrastructures. However, criticism about the high prices of medicines in the country dragged the prices of pharmaceutical companies. Likewise, it announced the implementation of tariffs to the products of those American companies that produce outside the country.

As a consequence in the financial markets, bond yields relaxed due to the global flight to quality, while equity markets closed flat without major changes. The Dow Jones remained below 20.000 levels, while the S&P500 closed steady at 2.274 levels, waiting to see the pace in Wall Street's quarterly earnings release.

Throughout the week, the rescue of Banco Monte dei Paschi in Italy was effected in order to clean up the country's financial sector. In addition, the ECB minutes showed evidence on existing political and economic uncertainties, and there appeared to be no consensus in establishing QE levels since a few ECB members expressed their preference for extending the QE for 6 months with an amount of 80.000 million euros, other members opted to increase it by 9 months to 60.000 million euros per month.

The weekly closures in the stock markets presented no surprises. In general, with the selectives flat without significant variations; The IBEX-35 at around 9.511, the DAX-30 at 11.629 and the STOXX-50 at around 3.324.

From the Asian continent, trade data was published in China, with new declines in exports exceeding forecasts (-6,1% compared to the -3,5% expected) and increases of +3,1% in Imports which led to a deterioration of the trade balance. Regarding the forecasts, those published by UBS remained stable at +6,4% for the 2017 financial year.

Despite the bad data, the Hang Seng closed with advances close to +2% quoting around the 22.937. In contrast, the NIKKEI225 closed flat at 19,287 despite statements made by Kuroda insisting on the strength of the country's growth rates.

As for currency, the dollar weakened in the face of the lack of clarity in Trump's statements away from parity (now around 1,0641 EUR/USD). In the same line, the pound suffered further cuts to the refusal imposed by Theresa May with the Eurozone to advance in the negotiations dragging the currency to 0.8743 EUR/GBP.

The last data updated about oil inventories (4,097 million today compared to the expected 1,162) pushed crude oil prices down, ending at levels of 55,45 USD/Brent despite cuts in crude oil inventories in spite of the predisposition of the main producers to reduce production quotas.