Profitability Reports of our clients from October 2017

Profitability Reports of our clients from October 2017

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GLOBAL MACRO PANORAMA

EURO ZONE: During the last meeting of the ECB it was decided to reduce to its half the purchases of assets (EUR 30,000 million) per month and the interest rates remained unchanged at 0%, leaving the door opened for further increases in the current levels of QE. 

GDP growth rates went up by +2,5%, exceeding forecasts and previous data of +2,1%. Nevertheless, we still do not see upturns in price rates (current CPI +1,4% vs +1,5% previous and expected).

Likewise, PMI rates of manufacturing activity reports reached their highest level from the last 6 years, showing expansive rates of 58,1 throughout September, benefiting from greater increases in orders for exports.

The latent uncertainty in Spain after the Catalan crisis hampered the evolution of the main selective sectors. The focus will be placed on the Catalan elections that will take place during the 21st of December. 

UNITED STATES: The impact of the hurricanes that passed through the US region did not affect the economy significantly.  

The ISM manufacturing data maintained expansive rates (levels of 58,7), while the ADP national employment report confirmed the strength of the labor market (with the creation of 235.000 non-agricultural positions).

The results publication season is coming to its end, about 75% of companies exceeded their profit forecasts, which have benefitted US selective advances.

The FED decided to maintain the rates within the +1 and +1,25% range. However, the door was left opened for a new rate hike (12-13 December).

The election of Jerome Powell to be the next chair of the FED did not surprised the market, investors expected continuity in monetary policy with Janet Yellen (mainly dovish).  

UNITED KINGDOM:We still do not know major progress in the Brexit negotiations” said the main English communicator Barnier, the disagreements between both parties made the work difficult. Likewise, Prime Minister Theresa May was criticized due to the loss of support for her political party. 

During the last meeting of the BOJ, it was decided to increase the reference rate by 25 b.p. up to the +0,50%. However, new rises were discarded waiting to observe the path taken by Brexit. 

JAPAN: Prime Minister Abe obtained, as expected, more support in the early elections held in the country. At the head of the BOJ, a new mandate was placed with Kuroda as Central Bank representative.

During the last meeting of the BOJ, rates were not increased, and inflation forecasts for the year 2018 were also cut.

CHINA (Mainland): at a political level, the general secretary of the Central Committee of the Communist Party was ratified as a representative for a new mandate.

We identified a moderation of the manufacturing activity rates (51.6 act vs 52 esp.).

FINANCIAL MARKETS (as of 03/11/2017)

The US markets maintained the benefits, boosted by good macroeconomic data, by the latent expectation in the tax reform of Donald Trump and the election of Jerome Powell as president of the Federal Reserve. The S&P-500 rose to historic highs of 2.587 summing a +15.60% YTD return, while the Nasdaq Composite technology has already accumulated a +25% progress in the year.

In Europe the advances were also widespread, among which we highlight the situation of free rise of the DAX-30 which stands now at 13.478 at the date of the report, while the Stoxx-50 remained around the 3.689 being pushed down by the events that occurred in Spain.

The Japanese selective NIKKEI-225 has already reached the short-medium term objective that we determined in the previous committee of 22.600 after rising a +9% during the October. While the Hang Seng remained flat at levels of 28.600.

At a sectorial level, we highlight strong advances in the technologic sector, benefited by the good business data published (+6,19% during the month of October). While the greatest falls appeared to be in the biotechnologic sector (-7,50%).

We continue to reiterate the slight volatility levels existing in the market, which have already fallen by more than -34% during the current year.

In the currency market, we highlight the dollar's progress against the Euro, driven by forecasts of new interest rate hikes. The pair was at the close of the month at around 1.16 EUR/USD, which means a -1% fall in the pair.

Among all the assets, however, the best evolution has been shown in the price of crude oil after rising a +11,60% to levels of 62 USD/Brent, especially due to the determination shown by Saudi Arabia to further reduce oil inventories.