Equity market trading was more nervous with the US and Japan losing ground and Europe and emerging markets treading water. Worries over Donald Trump’s electoral promises surfaced after the new administration struggled to pass its new Healthcare bill.
Equity markets rose for the second week in a row with Europe and some emerging markets leading the trend.
All eyes were on the ECB’s monetary committee meeting last Thursday and on the looming FOMC meeting on March 14/15. Last week, Janet Yellen’s comments reinforced investor expectations that rates would rise next week.
It was a good week for equity markets, especially in Europe which had been drifting lower for weeks. The global economic environment and earnings outlook remained encouragingly upbeat.
As investors kept a close eye on shifts in European political risk, especially in France, economic data confirmed that the outlook for growth and inflation was on an uptrend.
Europe will continue to enjoy economic growth judging from the European Commission’s decision to raise its forecasts. And with the Philly Fed index back to a 1984 high, momentum is also strong in the US. Growth drivers are still US consumers - retail sales rose again - and the reinforcement of the reflationary trade.
In spite of reassuring macro data on Germany’s industrial orders, surveys on French sentiment and US activity as well as rather solid company results, equity markets continued to hesitate over the elements in Donald Trump's programme relating to protectionism, fiscal stimulus and deregulation.
Markets were generally directionless over the week. Economic data and surveys, like the rebound in January’s ISM to 56, showed that the global economic recovery was still in place.
Donald Trump’s inauguration speech was in similar vein to his electoral campaign. His initial decrees will press for reduced regulation and higher infrastructure spending (Obamacare reform, rekindling of the USA-Canada pipeline project) but also more protectionism via the construction of a wall with Mexico and the...
Markets have flat-lined since the middle of December, bonds markets have calmed down and the US dollar has lost 2%. Investors have partly discounted any economic and earnings momentum from Donald Trump’s measures, notably lower corporation tax and reduced levies on capital repatriation.
The economic environment is still clearly robust but markets appear to be losing steam. After six months of the reflation theme, investors are pressing the pause button.
The start to 2017 extended the upbeat trend seen in December 2016. This last week provided confirmation of an improvement in economic momentum.
In a short week with most markets closed on December 26, trading was as usual light. European equities were little changed.
With economic data suggesting some acceleration, market sentiment was dominated by central banks. Mario Draghi had to clarify ECB strategy following a number of ambiguous comments from monetary policy committee members. The ECB is not looking to tighten and even offered some forward guidance.
In a very busy week in the eurozone, equity markets made strong gains thanks to the Green party’s candidate winning Austria’s presidential elections and the ECB’s monetary policy committee and in spite of Italians voting “no” in their constitutional referendum.
In recent weeks, the reflationary theme has continued to gain ground, especially after OPEC's agreement to cut production. The ensuing brutal surge in the oil price and its positive impact on oil stocks has only reinforced this paradigm shift.
In a short week on US markets because of the Thanksgiving holiday and Black Friday, equities edged steadily higher on upbeat economic data both in the US and in Europe.
Markets continued to play the Trump reflation trade, especially in the US.
Investors are keeping their cool and suppressing their dismay. Donald Trump’s victory in the US Presidential Elections has failed to disrupt markets, sparing investors a strong surge in volatility. After the initial shock, it is now time to look at positioning.
After the largely unexpected vote in favour of Brexit last June, Donald Trump’s victory reinforces our view that developed countries have moved into a period of profound political change. The previous such episode goes back to 1979-81 when Margaret Thatcher, Ronald Reagan and François Mitterrand came to power in the...