SUMMARY OF THE MACROECONOMIC INFORMATION
The macroeconomic scenario
Bounce US growth, stalled the European
The data for the second quarter confirmed a recovery in the US economy while Europe is characterized by data on average worse than expected, nevertheless does Fed lowered its forecast for US growth, while the BC and start the program for the purchase of securities ABS and covered bonds.
The stock market
Back volatility due to macroeconomic data
After a steep descent between late July and early August, and an equally steep recovery in August and September, the main international indices will move it away from the peak period in the wake of European and Chinese macroeconomic data day lower than expected. The stock is still supported by the huge liquidity that serves as the driving force and enables recovery whenever there are new openings positive
The bond market
Still space for a reduction in the spread
Despite the rally recorded in the current year to date, we believe there are still some factors that can withstand a further narrowing of the peripheral spread. Good performance year to date for the bonds body, thanks to the abundant liquidity in circulation in the markets.
Currencies
A mixed message from the ECB and common data on US employment
Underlying Themes confirmed the foreign exchange market after the ECB and the US occupied d dollar continues its run, confirming the upward trend after the strong labor market data come from the United States. In contrast, despite a technical meeting ECB, the euro still appears set to a structural decline.
The raw materials
Commodity still weak, weighed down by the lack of demand due to a weak economic cycle
The basic resources are from a period of weakness across all the comparii. them bearish picture is dictated by the weakness of the world economy, sanctioned by the revisions of the World Bank cut its growth forecasts for the period 2014-16 for China and throughout East Asia, one of the main absorption commodity.
Macroeconomics
USA: economy improving
A string of indicators related to the summer months and the data growth in Q2 marked a sharp turnaround: after a sharp contraction in GDP between January and March (-2.1% on a quarterly basis annuaiizzata), there was a rebound to 412% in the second quarter. The data is consistent with the directions of the survey and draws strength from a large contribution of investments and exports. It is confirmed positive, but only a modest acceleration, the dynamics of consumption, while the monthly sales data and surveys of trust retain a certain degree of volatility. Instead, they signal a partial setback data on the labor market, with the August report that has fallen short of expectations and the total number of new jobs that fell for the first time since beginning of the year to below 200 thousand. In view therefore of unemployment “little changed,” according to the measures of spread and expansion that continues to “moderate pace,” the Fed in mid-September has maintained tones still very accommodating. As expected, the US central bank has confirmed the end of October for the termination of the quantitative easing program, while there were no significant changes to the so-called forward guidance (guidance on future interest rates), with interest rates that will remain near zero for a “considerable time” (no change compared to the press in June). The main changes are then linked to technicalities regarding the future path of a rise in interest rates; on the one hand the precise definition of the instruments to be used and the other the waiting for a rate of increase in the rates of more rapid initial projections.
EUR Area: stops the growth
After four quarters of moderate but positive growth, the GDP of the euro area in the 20th quarter was unchanged on the two months basis, conditioned by a lower than expected German growth, stagnation and the French return to recession in Italy. Although the figure includes the negative effect of some special factors, monthly statistics and surveys confirm a deterioration of the economic cycle in the spring and outline a scenario of weak recovery, also recognized by downward revisions to growth estimates of OECD and ECB. The principal support for recovery should come from the private demand in the form of increased consumption by households and a positive contribution of exports. The data, however, do not show yet in recovery: consumption is held back by high unemployment (unemployment rates down but close to historic highs) and the weak growth of incomes, for the foreign trade, the positive effect of weakening euro is offset by geopolitical tensions. It seems also critical scenario of prices: inflation for the euro area in September, has been attested to a minimum by October 2009 at + 0.3%. Although the movement of prices in the short appears to be linked primarily to the evolution of the more volatile components, the negative surprises of the summer months forced the ECB to a downward revision of the reference scenario for inflation in 2014.
SUMMARY OPERATING TIPS
The economic environment continues to be characterized by modest growth at the global level and with strong elements of divergence between the different geographical areas. Uncertainties, especially geopolitical matrix, contributing to the deterioration in confidence. The situation is particularly delicate in the euro area where we continue to see a worsening of prospects in a context in which exchange rate depreciation could counteract inflationary pressures down. In the US, growth in the second quarter showed an acceleration is due to the manufacturing sector to domestic consumption. Among emerging countries, China remains a concern: after good economic data in between the first and second quarter, economic activity now appears to shrink again mainly because of the residential real estate sector. them 2 October, the ECB left interest rates unchanged, announced the main modes of operation of the program to purchase asset-backed securities and collateralized debt obligations, which will begin in the fourth quarter of 2014 and will last at least two years. The Board is unanimous in efforts to seek additional unconventional instruments as part of its mandate, in case you still need to address the risks caused by a period of low inflation for too long. In September, the euro area bond market was supported by both the expansionary monetary policy of the Central Bank is the weakness of macroeconomic data disseminated. In the US, the more favorable structure and the approach of the end of the growth cycle of the Federal Reserve vice versa have favored an increase in the rates of return ON all the deadlines of the curve. The loss of momentum in the euro area economy and concerns about the impact of the normalization of US monetary policy continues to affect the dynamics of stock markets, exacerbated by the continuing geopolitical tensions. The profit-taking involving especially the European markets suffered from the decline in confidence in the second half of the cycle and the American stock exchanges have corrected significantly adjusted earnings in the month of September. We maintain a positive vision moderately over the medium term, however, against a backdrop of slowing global growth and increased volatility due to continued geo-political unrest in several areas of the world, we suggest you take profits on positions in income.
STOCK MARKET
Back volatility on the stock
After a steep descent in July and August and an equally steep recovery in August and September, the main indium move away from the peak period in the wake of European and Chinese data below expectations. To support the recovery of the lists have been the easing of geopolitical tensions and moves Delta BC And, beginning with the reduction in interest rates to new record low (0.05%) and the announcement of a series of unconventional operations in support growth. The ECB policy should roll back the specter of deflation in some countries. The fundamentals confirm multiple moderately higher than the historical average, but not excessively. In this context, the European indices live and off, while those in the US are supported by macroeconomic data and corporate. The massive liquidity in the market continues to be the main factor in support of the bags despite the problems: the lack of attractive alternative investments, in fact, promotes the movement of capital to riskier markets. The context, however, is not without risk so you should provide an overview of the increasing volatility in Europa_ The speed at which the relative strength of various sectors and stocks shows how cash moves quickly from one compartment to another as soon as they present interesting opportunities and just as quickly as the positions are closed as soon as one of the risks listed above take over at that time. The multiplier effect of volatility is also reflected in the home directories because our country has a weaker macroeconomic environment. Despite the good performance achieved year to date (second only IBEX in Europe), in the last quarter of the FTSEMIB lost relative strength, obtaining negative results in the wake of the weak data and the slow pace of the process of institutional reform. Key risks confirming the weak growth in the euro in the wake of weaker than expected economic data, including even those Germans as confirmed by the decline in GDP in Q2 (-0.2%), which threw a shadow over the country driving of the Old Continent.
OPERATING TIPS STOCK
Valuations still affordable and the low level of interest rates on fixed-income world continue to support investments in the stock market, especially Europe, where the launch of extraordinary measures by the Central Bank to foster the increase of the cycle. them slowdown in domestic demand and the continuing difficulties in increasing the turnover by the companies, however, suggest a more selective choice of investment themes: our preference relates to companies operating internationally, with good flow visibility case and that can benefit the progressive weakening of the single currency.
Geopolitical tensions, the deteriorating economic situation in some areas and the possible movements of profit taking in the last quarter of the year may, however, contribute to an increase in volatility. For this reason it is advisable to consolidate some positions in profit and diversify equity exposure through investment characterized by reduced beta.
BOND MARKET
Government bonds: doubts about the ECB’s moves volatility on European government in recent sessions reflects the non-linear interpretation that the markets have given the ECB meeting in early October. The technical specifications of the two programs to purchase securities of the Central Institute provided they leave a certain opacity of what the “strike force” that these programs can have on the markets. It was perceived positively the extensive period of time and the inclusion, albeit with specific restrictions, Greece and Cyprus among the countries where they can be purchased ABS and covered bonds. The lack of a quantitative target, total or even monthly, has disappointed the market, reflected in a rise in yields both cores (such as German) and peripheral (such as Italian). It remains, however, to support the sector opening of the ECB using further unconventional measures within its mandate when what has been decided is not sufficient to keep inflation expectations well anchored around 2% over the medium term. A new impetus to a repositioning of portfolios to the peripheral bonds may also be possible to get promotions by agencies of the fleece. Over the next three months, the agenda of the reviews of the assessments of the countries of the euro area is very dense. Some countries that have suffered significant failures negii years, but in the meantime have put in place a robust fiscal consolidation and present with favorable growth prospects, could benefit from a series of promotions, in some cases even crucial in the decisions of institutional portfolios. in this sense, Italy, due to a growth scenario still very disappointing, hardly should be among the possible candidates to a promotion while one of the countries in the first row could be, among others, Spain.
Corporate Bonds: suffer the titles “speculative” Over the last month the junk bonds showed a negative total return, the fund is EUR (-0.7%) and especially on the dollar (-1.6%). Although the performance from January ’14 remains in positive territory, the correction brought the total returns to levels equal to or higher than those of earlier this year. MORE ON bond segment speculative concerns weigh on time for valuation. the same Yellen in July had shown that the assessments were at the limit. To initiate the recent correction, however, has contributed to the weakness in the equity market, as speculative securities and shares fit into categories of risk are very similar and the two asset classes maintain a high correlation. The hypothesis of a rise in US interest rates is clearly a supporting factor but so are the favorable liquidity conditions in the euro area and positive data on credit quality.
OPERATING TIPS BOND
During the month of September, in the area swear to tell the new measures expansionary monetary policy of the ECB, motivated by the weak economic environment, as well as by the fall in inflation expectations well below the ECB’s 2%, supported the government and corporate bond sector, the core and peripheral countries. In the US, the end of the day the securities purchase program by the Fed, scheduled for October, and the possible rise in policy rates during 2015 have disadvantaged the bond market and vice versa caused a rise in yields on all maturities of non-monetary curve. Although the correlation between the euro and the US bond sector remains positive, the different stages of the economic cycle in the Upcoming months could disadvantage especially the long end of the US market compared to the euro.
Emissions USD with limited duration: the US bond market continues to offer selectively exciting opportunities. The exposure to the dollar also makes it possible not only to diversify the appropriate section of bond portfolios, but also to add an additional opportunity there; investment through the exchange. We suggest, however, to maintain this asset class, contained a limited exposure to interest rate sensitivity in the wake of the expectations of a rate hike by the Federal Reserve already by the first half of 2015.
CURRENCIES
USD: The latest report on the US labor market is very positive. The number of employees rose more than expected and the unemployment rate fell further. The reaction of the dollar does not have to wait long, putting pressure on the threshold of 1.2500 EUR / USD. In light of this finding, the Fed might be thinking to anticipate the first rate hike if the improvements in the labor market would prove to be faster than expected. US: in the October meeting, the ECB disappointed partially foreign exchange traders not talking particularly new, as opposed to September, when, with a further cut in interest rates and with the announcement of a program to purchase Abs, had favored ii fall of ‘EUR. However, the path to weakening of the euro is likely to continue.
GBP: do not change investors’ expectations that they consider likely to change the current expansionary policy of the Bank of England only in 2015, given the economic cycle under way in the United Kingdom and the passage of the referendum in Scotland. Once again, the strength of the pound, especially against the euro, reflecting a change of direction in a narrow sense of the Central Bank.
JPY: The Japanese currency will remain structurally weak on joint action by the Bank of Japan and the Japanese government to which is added, the dollar / yen, the strength of the US dollar. Against a backdrop of mild return of risk aversion, which in itself already supports a retracement of the yen, the focus shifts to the new statistics on the Japanese economy and evaluations of the effectiveness of the moves of the Central Institute.
RAW MATERIALS
Energy: the geopolitical turmoil (the dangerous triangle truce in Gaza to the West-Russia-Ukraine until the intervention against ISIS) apparently did not cause any danger of shock energy to the world economy. The decision to announce a possible OPEC production cut, before the meeting of 27 November in Vienna, is a measure of the concerns about the cartel’s price-cutting in place.
Precious metals: the backdrop on the precious worsens because of the lack of reaction of gold and silver to geopolitical tensions. The total lack of investors to safe-haven par excellence (gold) and the metal more related to it (silver) penalizes the entire sector of the precious.
Industrial metals: metals have reacted negatively to the statements made by the Minister of Finance Lou Chinese Jiwei, remarked that as economic growth in China is undergoing decided downward pressure, depressing the same expectations for the launch of new stimulus programs and encouraging the weakness of the entire sector.
Agricultural products: the fund is in serious financial distress after disclosure of the September WASDE Report, which basically confirms yields and estimated excess inventories, accelerating the decline from the peak in place in 2014 and marking the new minimum 4 years. On the possibility of a price recovery in the short term, dominated by a generalized skepticism.