Profitability Reports of our clients from July 2017

Profitability Reports of our clients from July 2017

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GLOBAL MACRO PANORAMA

EURO ZONE: The performance of the markets during the month of July in the Eurozone has been closely linked to the statements of the main members from the ECB. 

The appearance of Mario Draghi in Sintra surprised with a more hawkish (restrictive) tone of what the president of the ECB uses to. So the reduction of the balance could start, according to the forecasts made by the market, in the beginning of 2018.

Unchanged after the ECB meeting, reference rates remained unchanged at +0% and deposit rates at +0,40%. Also, it was ruled out to have talked about the beginning of withdrawal of stimuli, postponing the discussion until autumn, what the market understood as a negative to begin the reduction of the program of purchases of assets.

Greece successfully completed the return to fixed income markets with 5 year maturity issues. The yield offered stood at +4,625%, below the +4,95% expected.

Although the leading indicators appeared to be moderate, the PMI Manufacturing data maintained highly expansive rates (55,1 with respect to the expected 56,3). While the latest consumer price data was set at +1,3%. 

UNITED STATES: Donald Trump's inability to carry out health care reform diluted expectations of implementation of the announced fiscal stimuli, pushing down equity markets and the dollar. 

Following the last FED’s meeting, the reference rates remained unchanged [+1% - +1,25%], and Janet Yellen announced that the "relatively early" reduction of the balance sheet could be initiated, which the market discounts for the September’s meeting.

At a macroeconomic level, the data set published has been positive; with PMI levels surpassing expected rates (53,2 actual vs the 52,2 expected) and GDP rates at +2,6% improving from the previous +1,2%. 

UNITED KINGDOM: The IMF cut growth forecasts for the UK by -0,3% (to +1,7% for 2017) in the case that the Brexit finally takes place.

We could expect rating reductions if Brexit takes a hard tone. 

JAPAN: For the main central banks, the Japanese one has been the only one that said to be willing to keep the current monetary policies expansive in the absence of inflationary signs. In this line, the target of inflation at the +2% was postponed in one year (until 2019). 

To emphasize, the support of the principle of free trade agreement signed together with the EU. With this, a 99% of the tariffs between both parties would be eliminated and as a result, exports would be boosted.

Manufacturing activity maintained an expansion rate of 52% and saw a near-7% increase in vehicle production and improved exports by + 10%. 

CHINA (Mainland): The main leaders in China sent messages of tranquility during the last month; the President Xi Jinping announced a tightening of regulatory policy on Chinese financial markets in order to reverse the population's growing indebtedness, while China's Central Bank said that it would maintain a prudent monetary policy.  

The economy exceeded the projected GDP of +6,5% after rising at +6,9% growth rates. 

FINANCIAL MARKETS (as of 31/07/2017)

During the month of July began the season of results publication in both Europe and the United States. While in the United States with a 70% of the companies that have already presented results, surprises were positive in a 75% of the cases, in contrast with the 60% reached in Europe. In this way, the main American selectives maintained maximum levels; The S&P500 went down by a +2% to the 2.470, while the Nasdaq Composite went up by a +3,38% to 6.348.

In Europe, the closures resulted mixed, deteriorated by the business results, tightening monetary policy forecasts and the strength of the euro. The DAX-30 fell down by a -1,68% to the 12.118, while the IBEX-35 maintained levels of the 10.500. While in Asia, the Hang Seng is located in the upper part of the bullish channel after rising a +6% during the month of July. The NIKKEI-225, for its part, lost the psychological level of 20.000.

Surprisingly, there were further reductions in volatility rates (-8%), reaching minimum levels of 10,26.

At a sectorial level, the month was positive, specially for the Gold & Precious metals sector, Materials, Technologyc and the Telecommunications sector.

In general terms, the Euro became again the currency that benefited most from the recent events (Central Banks, news and macroeconomic data). The EUR/USD stood at 1,18, while the EUR/GBP was at the end of the month at levels of 0,8961 EUR/GBP.