Profitability Reports of our clients from November 2017

Profitability Reports of our clients from November 2017

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GLOBAL MACRO PANORAMA

EURO ZONE: The publication of the last minutes of the ECB had not news on monetary policy, they decided to maintain the QE with an asset purchase of 30,000 mill. EUR per month as of January 2018 without change in interest rates. Though, the minutes reflect that some members proposed a clear end date, however, it was decided to maintain the flexibility to expand the program if necessary.

The economic growth of the Euro Zone was + 2.5% year-on-year in line with market expectations on a continuous path of increase, while the CPI showed slight progress below expectations (Current CPI + 1.5% vs + 1.6% exp and + 1.4% prev). Other activity data indicated favorable growth rates, such as manufacturing PMI (Current 60 vs 58.3 exp) and the PMI services (Current 56.2 vs 55.1 exp). The investor confidence index also far exceeded expectations (Current 34 vs 30.8exp).

Despite of positive data from the European economy, the main stock index suffered monthly falls affected by the appreciation of the Euro against the dollar (EUR / USD + 2.22% per month), which penalizes exporting companies. Added to this scenario, the political situation in Germany with the difficulties to create a coalition government and the progress of the Brexit negotiations also affected stocks markets.

UNITED STATES: The North American economy continues showing strength. The GDP of the third quarter exceeded expectations, Current 3.3% (3.0% prev vs. -3.2% exp). The variation of the CPI Y/Y stood at 2.0% in line with expectations. While the unemployment rate decreases to 4.1% (4.2% prev and exp).

This is a favorable scenario to increase interest rates by the FED on December. The last FOMC minutes show in which there were no changes in monetary policy as expected by the market. The objective of achieving inflation of + 2% is maintained, although some committee members advised about the effect on inflation that a tightening of monetary policy would have in the short term, most agree that, to maintain the strength of the market labor and activity indicators, in the medium-term inflation will converge to the objective level.

The main North American stock indexes ended with new highs, motivated not only by the good moment shown by the economic data but also by a more stable political scenario after the approval of the tax reform proposed by Republicans, in addition to the declarations of Jerome Powell, next president of the FED who will continue with current monetary politics, he agrees with increases in the interest rate and reduction in the balance, and reduce the strict regulation of the banking sector, which stimulated financial stocks.

UNITED KINGDOM: During the last BOE meeting interest rates were normalized, increasing by 25 pbs the reference rate up to + 0.50%, this restrictive measure is taken in a scenario of uncertainty by the Brexit, because the parties have not reached any significant progress in terms of the rights of European citizens. However, in terms of financial compensation, the British media have said that an agreement would be reached.

About macroeconomic indicators, the annual CPI reached levels of+ 3.0% (+ 3.1% exp), October consumer spending was +2.4 (+ 3% ant), while GDP of the third quarter was in line with expectations at 1.5%.

JAPAN: During the last meeting of the Bank of Japan, an expansion of its monetary policy was discussed based on the fact that the goal of achieving inflation of 2% is still far away, however, it was decided to maintain the current strategy.

The GDP for the third quarter stood at 1.4% (Ant 2.5%) affected by declines in consumer spending higher than expected (-0.5% Current vs -0.4% exp and + 0.8% prev) showing continued weakness in private consumption, however, the growth of exports offset with an interannually variation of 14%.

CHINA: China's national development and reform commission announced that the country's growth is expected to exceed growth rates of + 6.8% in 2017. On the other hand, the upturn in the inflation figure (Current 1.9% vs. 1.8% exp and 1.6% prev) improve the stock market in addition to the Central Bank's continued injection of liquidity into the market.

However, we identified moderation in the annual retail sales data (Current + 10% vs + 10.4% expected) and industrial production (Current + 6.2% vs. + 6.3% expected).

FINANCIAL MARKETS 

November ended with earnings on the US stock markets that reaching new highs, this behavior was supported by solid macroeconomic data, especially the rise of GDP by the positive completion of the publication of company results and progress in the adoption of the tax reform that would favor US equities to a decrease in the tax burden on companies.

In Euro Zone, the favorable economic data were not enough to boost the stock markets. German political situation and uncertainty about the Brexit European bourses led to widespread falls end with the Eurostoxx50 fell -2.83% -1.55% the DAX retreated, while the Ibex 35 recorded one of the most significant declines the region (-2.97%), in the middle of the political situation that the country is experiencing.

Asian markets outperformed global equity markets and were the winners of November, the Japanese NIKKEI-225 selective ended the rise in levels of 22,724 points after an advance of + 3.24% while Hang Seng gains + 3.3% to 29,117.

In the forex market we highlight the appreciation of the Euro against the Dollar, at the end of the month the pair stood at 1,190 motivated by the uncertainty of the last weeks before the US tax reform.

On the other hand, crude oil had a positive performance ending at around 63.57 USD / barrel driven by the extension of OPEC production cuts until December 2018, however, this decision did not take the market by surprise as previously Several of the ministers were in favor of withdrawing almost 1.8 million barrels per day (mbd) from the market.