Profitability Reports of our clients from June 2017

Profitability Reports of our clients from June 2017

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GLOBAL MACRO PANORAMA

EURO ZONE: The OECD increased its global growth forecast up to +3,5%, allocating an expected growth of +1,8% for 2017 (from the previous +1,6%) to the Eurozone. 

After the last meeting of the ECB, the reference rates remained unchanged. Growth forecasts stood at +1,9% for 2017 (similarly to the research made by the OECD), while inflation was revised down to 1,5% for the current year. 

Expectations of monthly purchases reductions within the bond market increased for the next year following the statements made by Mario Draghi at SINTRA’s conference. At this conference, the ECB’s president highlighted the strongest growth in the region, but the most noteworthy announcement had been the announcement of the start of a gradual adjustment of stimulus as the economy accelerates its growth rates and confirms the positive trend of inflation.

As regards to the political sphere, the resolution of the French elections alleviated the fear of populist parties rises in Europe with the victory of centralist Emmanuel Macron. 

UNITED STATES: In the last publication of the Beige book from the Fed, the growth rates achieved were seen as "moderate". In contrast, manufacturing activity data continued to strengthen due to the growing number of orders.  

The strength in the labor market has been maintained and inflation rates of +2% are expected to be reached during the current year. 

According to this basis, the FED proposed an action plan to reduce its balance. By the moment no date has been set, but the market would be discounting it for the next October. 

UNITED KINGDOM: As expected, the conservative party won the early elections. In contrast, Theresa May did not reach the desired absolute majority, a factor that could delay the Brexit negotiation process. 

The BOE announced a possible rate hike in the coming months. This action will be subject to the evolution in domestic consumption, wage level and the evolution of the Brexit. 

JAPAN: During the last days, the Japanese country reached an agreement about free trade with the EU, eliminating the 99% of tariffs, factor that could benefit the exports. 

The released data led to doubts about the maintenance of a positive trend in the economy. The latest GDP update fell to +0,3% from the +0,6 forecastes, so the BOJ revised the annual GDP forecasts to +1%. 

However, the Central Bank of Japan held the speech of support to the economy. 

CHINA (Mainland): The Bank of China sent a message of calm to the markets in order to appease the fears of a banking crisis, while the National Economy Bureau improved GDP forecasts to +6,8%.   

Regarding the evolution of the region, it appeared to be in line with the declarations made by its leaders, presenting PMI rates (both manufacturing and services) at expansive levels. 

FINANCIAL MARKETS (as of 30/06/2017)

The main European stock index markets became penalized anticipating more restrictive monetary policies. The cutbacks reached cuts a -4% in the case of the IBEX-35 that closed the month around the 10.444, while the STOXX-50 and the DAX-30 did so with falls of -3,51% and -2,68% Respectively (around 3.441 and 12.325). 

The North American closures ended mixed with falls of -1,70% in the Nasdaq Composite, while the Dow Jones remained at 21.349 with slight gains of +1%. No major changes from the Asian continent; the selective NIKKEI-225 ended with slight gains at support levels of 20.000, while the Hang Seng closed flat at 25.764. 

We denoted an increase in volatility levels of +13% (still at minimum levels). Such rallies could increase if fluctuations within the crude oil market intensify.

There have been generalized rebounds in the TIRs of the government bonds, especially the German and the English ones, in view of the expectations that economic policy will take a more restrictive tone in the medium and short term.

The Euro continued to appreciate, especially with respect to the Yen after posting a sharp drop in growth rates. The EUR/JPY ended June trading at 128,4 (+1,90%), while the EUR/USD closed at 1,1423 after a +1,90% gain.

As we have been anticipating in the previous points, the asset that presented the greatest volatility in the commodity market has been the price of the crude oil. Its price fell down by -5,35% to levels of 47,92 USD/Brent, penalized by the discourse of countries like Russia ruling out further cuts in their production rates.