SUMMARY OF THE MACROECONOMIC INFORMATION
The macroeconomic scenario
It sharpens the divergence between the US and Europe
Positive signals from the US macroeconomic data with consumption and investments, net of extraordinary factors and some variability, showing solid growth in the summer months. In Europe, the slowdown in the broader and enduring expectations for the German economy affects the prospects for recovery de! cycle and induces governments and international authorities to a new downward revision of the estimates.
The stock market
Extreme volatility in the price lists, but the decline in October was interrupted
Moment of extreme volatility on European markets on the one hand continue to benefit from the enormous liquidity in the market and the other affected by the fears of a sharp slowdown in growth in Europe. The interventions of the central banks in each case stopped the fall of October.
The bond market
The ECB supports the fund
Despite! To market volatility and hotbeds of tension resurfaced in recent sessions, there are still some factors that can support a narrowing of spreads on peripheral (such as BTP) from current levels, thanks to the measures of the ECB. Even corporate bonds will benefit from it, although in this case remains particularly important selectivity.
Currencies
The Fed says the dollar, ECB and Bank of Japan pushing downward euro and yen
Fairly clear picture on the foreign exchange market: the dollar continues its run, confirming the upward trend, after the conclusion of the quantitative monetary policy by the Fed. In contrast, the euro is definitely set to a structural downward after the words of Dragons . With the further expansion of the Japanese, the Bank of Japan makes it all the more structural depreciation of the yen.
The raw materials
Endures the weakness of commodity, weigh the lack of recovery and the strong dollar
Continues the period of greatest weakness in all sectors of the resource base. The picture remains bearish anchored to the modest growth of the world economy, as attested to by the recent spike global macroeconomic data, which show in Europe and Asia the major causes of non-recovery cycle.
Macroeconomics
USA: the economy is growing lively
The latest data showed a stabilization at lower levels but still solid for confidence, activity and consumption. In terms of domestic demand, consumer spending and household incomes continue to show positive growth rates but rather volatile. Appears uniformly positive and strong improvement in the labor market. The average payroll in the 3rd quarter amounted to share 224 000 units per month and remains higher than 200 thousand also in October. the progress made in the labor market are closely monitored by the Fed. The minutes of the September meeting showed two innovations: the fear concerning the possible effects of the weak outlook for global growth and the strengthening of the dollar, with possible negative effects on the volume of exports and on inflation. Given these uncertainties, the stool has decided not to change the indication that rates will remain low for a “considerable period” after the end of the program to purchase securities. The main concern at this stage is to clarify that the future path of rising interest rates will depend on! tone of macroeconomic data and the evolution of the scenario. For the moment the market projects still in the 1st half of 2015, the turning point on rates, although the rise could be postponed.
Euro area: the stagnation arrives in Germany
The last few weeks have seen a new twist in a negative macroeconomic data in Europe, starting with the German statistics. The weakness of the confidence surveys, were added to the slowdown of industrial production, industrial orders and exports, which prompted the German government to cut the estimates for the current year and the next. Although the data were penalized by the impact of seasonal factors and calendar effects negative, the German slowdown, combined with the weakness of France and Italy, contributed to deteriorate further expectations of recovery for the European cycle, both in terms of consumption that for the production activity. If on the face of domestic demand indications remain negative, even from the side of fiscal policy hardly reach new stimulus to growth, given the very limited room for maneuver available to France and Italy and the unwillingness to intervene for Germany. To these factors are added strong elements of brake-related structural conditions of the labor market and inflation. The month of September for the index of consumer prices saw a minimum since 2008 for overall inflation (down to + 0.3%) and especially a new and unexpected braking to the increase of the index, which excludes food and energy (dropped to + 0.7%). For the labor market are confirmed in September unemployment rates close to historic highs for the peripheral countries and an unexpected break in employment growth for Germany. In light of these data, it explains the warning issued by the IMF, who said he was particularly concerned about the growth prospects of the euro area and has revised down again towards the target of structural growth.
SUMMARY OPERATING SUGGESTIONS
The dynamic global economic provides sensitive elements of divergence between different geographical areas. In the United States the recent slowdown of some leading indicators continue to flank the gradual improvement of the labor market, while in the euro area the scenario continues to be characterized by low growth, reduced inflationary pressures and high unemployment. Emerging countries have emerged mixed signals: the positive indications have come from countries like India, engaged in the path of structural reforms, while the main source of concern remains the dynamic growth in China. The Council of the European Central Bank November 6 expressed unanimity on the use, if necessary, further monetary stimulus and decided to leave unchanged the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility Central Bank (respectively 0.05%, 0.30% and -0.20%). Despite the FOMC’s late October has expressed tones judged “more restrictive than expected” and announced the closure of the program of quantitative easing, yields on the US bond curve declined across all maturities not monetary. In the euro area, the positive performance of core government has been realized in the first half of the month, mainly due to increased volatility in the equity markets. The main stock markets in recent weeks, they managed to recover most of the losses recorded in the first half of October, attributable to continued signs of slowing global growth and geopolitical unrest that affected several areas of the world. European shares have benefited from the measures taken and by expectations of further stimulus by the ECB. In the US however the major indexes have brought new highs supported by a generally favorable economic situation and a very positive start to the season of quarterly. On a medium-term time horizon confirm a moderately positive view of the equity markets that continue to benefit from the high liquidity in the markets. However, in a scenario of increased volatility due to the deterioration in the outlook for growth in some areas and the persistence of geopolitical unrest, suggest consolidate selectively gain some positions and allocate the cash from of non-directional strategies.
STOCK MARKET
Bags in recovery after the slip of October
In a context of extreme volatility, the major stock indexes bouncing from major lows in mid-October. The US market makes an amazing recovery in terms of strength and breadth and continues to show relative strength, supported once again by the good times, the good macroeconomic data and a start of the season of quarterly brilliant. In Europe, the recovery is heightened by the possibility that the ECB will intervene with new stimulus measures, although fears for growth and disappointing quarterly non brilliant keep lists Eurozone between special surveillance. To increase volatility a number of reasons ranging from concerns about a slowdown in economic growth, the specter of a possible government crisis in Greece, the danger of a spread of the Ebola virus after new infections in the West, to the difficult talks between Russia and Ukraine, and a rethinking of certain extraordinary transactions previously announced. With regard to growth concerns continue to worry about the slowdown in Europe and even in October, the International Monetary Fund lowered its estimates of the global increase of PII to 3.3% (-0.1% compared to the previous year) for the year ongoing and 3.8% for 2015 (-0.2%). Macroeconomic data are still disappointing, with the German IFO index fell in October to the lowest level in two years. With regard to fundamental Euro Stoxx, reduces the relationship between prices and earnings compared to the detection of last month, following the downsizing of the quotations. Currently the index shows multiple useful around 15.3, moderately above the historical average 2007-13 but offset by growth expectations for the next two years to around 12.3%, in order to confirm a peg just above unity . The data for the 3rd quarter of the Euro Stoxx showed an average growth in earnings of 2.9%, while it continues to worry about the decline in revenue. On average, the quarterly were better than expected in 48% of cases, even if they can be called brilliant; some groups in particular technological beat estimates although others, revising downward the outlook, detracted from chemicals and cars.
OPERATING STOCK SUGGESTIONS
We maintain a moderately positive view on the stock market that continues to be supported by the attitude of accommodative central banks and offer more attractive valuations, especially in the euro area. The bags, however, remain sensitive to news on both the front and on the macroeconomic and microeconomic for this reason it is suggested to diversify equity exposure through strategies characterized by a lower • sensitivity to equity markets. In the investment choices of sectors and companies in the euro zone we prefer those companies that have a strong international component, exposed to markets with high growth rates and favored by the progressive weakening of the domestic currency in order to increase revenue and support flows cash, with attractive returns on investment. By sector suggest that industrial and consumption, focusing attention to companies with a good portion of their sales in the US market where the dynamics of retail sales is returning to pre-crisis levels. Specifically, the media sector and in particular the European advertising agencies, may have an area of significant growth on the channels connected to the internet.
BOND MARKET
Government bonds: nearest buying by the ECB At the meeting of November 5, the ECB kept interest rates unchanged. The refinancing rate is 0.05%, the deposit rate to -0.05% and the marginal rate of 0.15%. 0 statement was important not only for content, but also because, as pointed out by the Dragons, was signed unanimously to quell the controversy of the last days on internal dissent to the ECB target budget, entered explicitly in the press Home becomes a real intermediate target of monetary policy. However the hypothesis day an expansion of more than 1,000 billion euro over the next two years appears unrealistic with current tools. Probably even from these considerations, the opening of President Draghi to further unconventional measures if I scenery showed new signs of deterioration (especially inflation expectations) or where instruments decided thus far by the ECB did not prove as effective as expected. The ECB, in the words of Draghi, has already involved the staff of the Central Institute and Eurosystem concerned, in order to have a timely preparation of these additional measures, if they were to actually be implemented.
Bank bonds: on average exceeded the stress test
Were presented October 26, in the financial markets closed, the results of the “thorough assessment” (Comprehensive Assessment) of the 130 European banks. Known as the exercise was divided into a review of the quality of bank assets, in order to verify if the capital “better quality” is adequate to face the risk of various assets (loans, bonds, etc.), Recognized in end of 2013. the results appear at the system level, overall, quite encouraging and capital shortfalls are in the lower part of the range of estimates that had circulated in recent weeks. As seen from the great differences between the results to 31 December 2013 and the September 30, 2014, the final outcome of the test is primarily to be connected to the enormous work done by the banks to strengthen capital in recent months. None of the major European banks was rejected, with institutions in France, Germany and Spain also coming out unscathed from the test. The absence from the “black list” of all banks dimensionally most important is a positive sign because it indicates that the risks to the European financial system, if any, are of a local nature and not systemic.
OPERATING BOND SUGGESTIONS
In October, the prices in the bond market of the core countries of the euro area have been supported by several factors such as increased volatility in the equity markets, the confirmation of the expansionary monetary policy of the ECB, the weakness of the economic and lowering expectations inflation well below the 2% target.
In the US, the Fed has indicated that a highly accommodative monetary policy will be maintained for a “considerable time” and expressed cautious optimism about the prospects for recovery. the weakness of the economic situation in the euro area and the descent of inflation expectations in the US are the main factors that will continue to support prices in the bond market in the near term.
Flexible strategies: the divergence of attitude among the major central banks in the coming months is likely to remain one of the main catalysts of the market. For this reason it is necessary diversification through exposure to different dynamic fixed income sectors and flexible management of interest rate and credit risks.
CURRENCIES
USD: at the end of the last meeting, the Fed has finally closed its program of quantitative monetary policy. In light of this framework, it is clear that the improving US economy will follow an upward adjustment of interest rates and, consequently, a strengthening dollar.
EUR: the last ECB meeting ended with rates unchanged and with a willingness to adopt new expansionary measures, such as the purchase of government bonds. All this was reflected on the euro, which will remain strongly set downward, also incorporating greater volatility than in the past.
GBP: the last meeting of the Central Bank of England (BoE) does not change the cost of money (0.5%), as well as does not vary the size of the purchase of securities (375 billion pounds). Do not change the considerations about a possible restriction of the current expansionary policy only in 2015, reinforcing the idea of a strong pound.
JPY: the last meeting of the Bank of Japan ended with the announcement of a new rise of monetary stimulus, which rises to 80 trillion yen from 70 trillion per year. The new measures aim to strengthen inflation expectations. The decision has had immediate impact on the yen that has accelerated its depreciation.
RAW MATERIALS
Energy: the outlook remains neutral but in constant danger of deterioration. You. evident for some time as all major forecasters (OPEC, IEA, EIA) consider that the oil market is in surplus and that OPEC should cut its production, even when there conflicting signals from some members, primarily Saudi Arabia.
Precious metals: the basic framework on the precious remains compromised, because of the lack of reaction to the geopolitical tensions and the rise in risk aversion, due to stock market volatility. In addition, the strengthening of the dollar is a weakness that also involves the silver.
Industrial metals: despite economic growth in China is undergoing decided downward pressure, the metals recovered slightly from their lows in 2014 but the sentiment remains negative. This framework, combined with the lack of expectations about the launch of new stimulus programs in China, is favoring the consolidation downward.
Agricultural products: the sector scored a mild recovery after the disclosure of the WASDE Report of October, which basically confirms abundant harvests and as many high ratings on stocks, but a snapshot of the previous less bleak, allowing prices, dropped a lot in the past few months , to recover slightly.