Profitability Reports of our clients from May 2017

Profitability Reports of our clients from May 2017

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GLOBAL MACRO PANORAMA

EURO ZONE: Following the last meeting of the ECB, Mario Draghi confirmed the recovery of the region, but he did not confirm a victory over the prices evolution, leaving opened the possibility of introducing new monetary stimulus. Growth forecasts for 2017 were increased to +1,9% compared to the forecasts of +1,8%, while inflation was reduced to +1,8%.

According to Nowotny, the ECB could start reducing the QE levels by the end of the year.

The 15th of June is the next date on which Greece will meet with its creditors to reach an agreement on the conditions for the release of aid funds.

The Italian TIRs of the bonds rallied anticipating the possibility of holding early elections in the country on September 24th along with Germany.

Despite the latent uncertainty existing within the political arena, the macroeconomic situation continued being positive after posting PMI rates at historical highs (57), supported by the expansion in production rates and new orders, with unemployment rates falling, and rises in price levels.

UNITED STATES: Full employment rates were maintained, whereas, on the other hand, during the 1st Q, there has been a deceleration which, according to the statements made by the FED, will be transient and motivated by the political factor. Thus, according to forecasts, it will not affect the standardization process.

In this line, several members from the FED began to talk about a reduction of balance within the second half of the year.

Donald Trump at his last meetings, made effective the departure of the Paris agreement on climate change.

UNITED KINGDOM: Following the BOE meeting rates were maintained at +0,25% and expected growth rates were cut at +1,9% from the previous levels of +2%.

Theresa May ruled out holding a pro-independence referendum in Scotland until the end of the Brexit.

Given the outcome from the English elections, we will keep following the evolution of the negotiations between the Conservative party and the Labor party after the failure of Theresa May on reaching the absolute majority.

JAPAN: Kuroda could follow another year leading the BOJ's command. In the latest GDP data (from 1Q17), the economy grew below expectations; at +1% vs. the +2,4% expected and the previous +2,2% levels (in annualized terms). However, it should be pointed out that this figure usually presents a high volatility, so we will be attentive to the next data and the BOJ meeting next Friday.

The favorable outlook on the Japanese economy was maintained, which has been supported by the recent rebound to an expansionary level of 53 in manufacturing activity rates.

CHINA (Mainland): Moody's lowered its credit rating to A1 from Aa3, anticipating increases in the country's leverage and deterioration in financial strength.

Chinese media also warned about the possibility that in June liquidity will be restricted to a rise in rates and new banking controls.

FINANCIAL MARKETS (as of 05/31/2017)

Mixed closures in the main European selectives; the IBEX-35 finished flat around the 10.880, while the DAX-30 went up a +0,86% ending around the 12.615 maintaining the bullish trend, while the STOXX50 fell by -0,66% unable to break the existing resistance in levels of The 3.650.

On the other hand, within the North American equity markets, maximum levels were maintained in the indices. The S&P-500 closed at 2.411 (+0,86%), while the Nasdaq composite technology went up by +1,69% closing in May around the 6.198.

New developments were made also on the Asian continent; +3,91% in the Hang Seng, which rose to the 25.660, while the NIKKEI-225 went up by +1% up to the 19.650.

At a sectorial level, the best performers were those from the Utilities sector (+5,41%), followed by non-cyclical consumer assets (+4,66%) and telecommunications services. On the decline side, falls were particularly concentrated in the biotechnology sector (-3,64%), energy and gold & precious metals (-1,64% and -1,49% respectively).

Within the foreign exchange market, the Euro continued to strengthen benefiting from good macroeconomic data published during the month of May. The EUR/USD ended at 1,1241 EUR/USD (+2,87%), while the pound ended at 0.8721 EUR/GBP in face of the imminent English elections, rising +3,24% with respect to the pound.

Regarding commodities, the  Barrel of Brent maintained its fluctuation between the range of 46 and 58 USD/Brent. We hope that this band will be kept waiting for the tension between the Persian Gulf countries to be resolved and the production rates stabilized.