Profitability Reports of our clients from August 2017
Monday, 18 of September 2017
World Macro Panorama,
GLOBAL MACRO PANORAMA
EURO ZONE: Mario Draghi fulfilled expectations by keeping the reference rate unchanged at +0% and the deposit rate at -0.40%.
The meeting that took place the 7th of September has been the main engine of the market. Following this announcement, no changes were announced in the current monetary policy, postponing this discussion until the next meeting on October 26th.
The decision to reduce the purchase levels of bonds will be linked to the evolution of inflation and the Euro, also putting on the table the possibility of extending them until the end of the year or beyond.
As for the strength of the Euro, Draghi acknowledged the possibility that this would be a new source of uncertainty despite acknowledging that few members were worried.
Growth forecasts improved (+2,2% for the current year); on the other hand, inflation declined (+1,5% for 2017 and +1,2% for 2018).
Growth rates continued to favor the region although the negative effect over the export activity that appreciation of the Euro had on the economic evolution (GDP +2,3%).
UNITED STATES: The main references had been the publication of the FED minutes, the appearance of Janet Yellen at the Jackson Hole meeting, as well as the publication of the Beige Book.
The minutes from the FED created some confusion due to the lack of agreement among members regarding inflation forecasts. The vision of the economic cycle was positive, on the other hand, they expect that inflation levels to continue moderated.
At meeting of the Jackson Hole, Yellen avoided talking about monetary policy, insisting on the need for changes in financial regulation to remain "modest".
The markets anticipated that the FED will initiate the reduction of the balance sheet on September while there is no consensus about a new rate hike during the current year.
Without further developments in the Beige Book from the Fed, the robust growth vision was maintained, highlighting the improvement of private consumption, investment and the manufacturing sector.
Donald Trump managed to raise the debt ceiling after reaching an agreement with the Democrats in order to meet the costs of hurricanes Harvey and Irma.
The latest GDP data surprised surpassing the highest figure of the last two years (+3% vs. +2,7% expected).
UNITED KINGDOM: although the Brexit took a back seat, the inability to reach an agreement with the EU continued to push down the pound and equity markets.
After the BOE’s meeting, reference rates remained unchanged at 25 basis points. It was also decided to continue with the asset purchase program of GBP 435.000.
Michael Saunders from the BOE affirmed the possibility of a rate increase as long as growth rates continue to rise.
JAPAN: The economic performance maintained a moderate recovery, according to the latest report released by the Cabinet Office of the BOJ.
In its last appearance, Kuroda from the BOJ announced the maintenance of the current lax conditions after referring to the low levels of inflation (+0,4% annualized data).
CHINA (Mainland): The refusal shown by Kim Jong-un to end the missile tests, ordered to ban imports of coal and other minerals from North Korea.
Growth forecasts continued to be positive in relation to the maintenance of PMIs in expansion rates (51,7 in manufacturing and 53,4 in services).
FINANCIAL MARKETS (as of 01/09/2017)
With the end of the earning season in the US, if we look at the earnings per share of the S&P-500 companies, we see that 77% of companies outperformed profit forecasts with a 21% . This fact maintained the main selectives in levels of historical maximums; the S&P-500 around 2.476, while the Nasdaq Composite made it with gains of +1,37% gaining up to 6.435.
In contrast, in Europe the closures were mixed, with the IBEX-35 being the index that suffered the largest losses; around 10.325 (-1.68%) at the end of August. The business results also did not present any big surprises; 59% of companies exceeded forecasts, with average earnings per share up +3,71% above expectations.
In Asia, the Hang Seng continued the positive trend ending the month around 27.953 (+2,30%), while the Nikkei-225 fell down by -1,17% to 19.691.
Volatility indexes remained at minimum levels (10,13) after falling back another -1,27% during August.
At the sector level, the best performers were the gold sector, which is an asset that benefits in times of uncertainty, followed by the biotechnology sector, which grew a +4%. The largest losses were in the energy sector (-3%).
In the fixed income markets we identified new increases in risk premiums, especially in Greek, Spanish and Italian.
The European currency continued to strengthen, especially with respect to the pound (up to 0,8961 EUR/USD) and against the US dollar (1,1840 EUR/USD as at 01/09/2017).