US treasuries continued to move in their trading range, set since February, and there are currently no signs that the 10-year US Treasuries might break through the 3.0% yield level. Also in Europe, we saw core government bonds from Germany, France and the Netherlands moving in a trading range, and outperformance for European peripheral bonds from countries such as Italy, Spain and Portugal.
Strong economic growth in the developed countries and most emerging markets, high consumer confidence and strong business sentiment indicators have set a good framework for the first-quarter earnings season that just kicked off. What are we looking for as the earnings season unfolds?
While there have been a series of dramatic headlines over the past month, regarding trade war fears, US political scandals, declines in tech stocks and heightened tensions in Syria, actual economic and company fundamentals remain solid.
Stock markets were calm this week, with stocks in the US and Europe rising slightly compared with last week. Investors have become less concerned about an escalating trade war between the US and China, following comments by the Chinese President Xi Jinping about opening the Chinese economy and reducing tariffs on imported cars. The possibility of a US military strike on targets in Syria did not worry investors too much. The oil price, however, did react and rose some 5%.
Given nervous equity markets and a decline in leading indicators, especially in Europe, German Bunds and US Treasuries continued to be used as safe havens this week. Ten-year Bund yields are back to 0.5%. This is at the top of the range in which they traded for most of 2017. We expect that leading indicators will turn more positive again, after adjusting to more sustainable levels.
This week started with declining stocks prices, as risks linked to taxation and regulation have triggered profit taking on the IT sector, in particular on Alphabet, Amazon and Facebook.
The ABN AMRO Investment Committee retains its positive outlook for economic growth, muted inflation and a gradual approach by central banks to more normal (higher) interest rates.
Equity markets had a tough week and lost 3-4%. A number of events grabbed investor attention, ranging from the (data) crisis around Facebook, to the Federal Reserve's latest meeting with the new Fed Chair Jerome Powell and additional announcements on US trade tariffs.
In our Investment Outlook, published in December, our Chief Economist Han de Jong described the investment environment of 2017 as “nothing short of incredible.” It was a year expected to be a solid basis for economic activity in 2018.
Over the past weeks, equity markets had difficulties to take direction. Investors were weighing the potential impact of the US trade tariffs and the departure of the US Minister of State, Rex Tillerson. The resignation of Gary Cohn as Chief of the National Economic Council earlier in the week, also made investors somewhat uncomfortable. US stock markets, however, outperformed European market in the last weeks.
Thanks to growing awareness and new funding sources, sustainability initiatives are gaining momentum across Europe.
Stock markets had a good week. European stocks outperformed the US, and rose some 2%. Investors do not seem to be too worried about the potential tariff plans of the US government and the risk of a trade war with China or Europe.
Under the banner of 'Make America Great Again!' US President Donald Trump announced last week that he would be imposing import tariffs on steel and aluminium. It was an unexpected proposal, made on Thursday, after a meeting with industry executives and promoted later via Twitter. The details have yet to emerge in the shape of a policy statement. Nevertheless, markets took it seriously, with US stock markets seeing an intraday decline of 2%, before regaining lost ground. On Sunday, Trump administration representatives said that more details could be known as soon as the end of this week.
Stock markets have been choppy this week. As of Thursday afternoon, the S&P 500 Index is now back above its level at the end of 2017. This is following the decline in stock markets that began at the end of January. The European and Japanese stock markets have also somewhat recovered, but are not yet above their levels of year-end 2017.
When Jay Powell was appointed Chair of the Federal Reserve last year, investors expected him to provide stability and to continue the very patient policies of Janet Yellen. But circumstances have changed since his appointment, with equity markets just over a nasty speed bump. Powell’s first congressional testimony was therefore under heavy scrutiny.
By the end of next year, four of the six members of the European Central Bank’s Executive Board will have been replaced – including President Mario Draghi. In this interview, Mary Pieterse-Bloem, ABN AMRO Global Head of Fixed Income, looks ahead to the impact of these changes for investors.
After the equity recovery last week, the S&P 500 Index and the European Stoxx 600 more or less stayed at the level of last week’s close. The same goes for all the sectors, except for consumer staples, which declined by 2%, because of Walmart.
Last week, ABN AMRO signaled that the attractive yields of Italian government bonds were a buying opportunity for investors. But what about the political risks?
In its meeting on Thursday, ABN AMRO decided to reduce its strong underweight in bonds funded by cash. In addition, our view continues to consist of a positive stance towards real estate, a moderate preference for equities and a neutral stance towards commodities and hedge funds.
BGL BNP Paribas and ABN AMRO Bank N.V. announce that they have signed an agreement concerning the acquisition by BGL BNP Paribas of all the outstanding shares in ABN AMRO Bank (Luxembourg) S.A. and its fully owned subsidiary ABN AMRO Life S.A. BGL BNP Paribas will transfer the activities of ABN AMRO Life S.A. to Cardif Lux Vie immediately following the acquisition. The proposed transaction, which is still subject to regulatory approval, should be finalised by the third quarter of 2018.
