The first week of the year was particularly positive, and broadly in terms of asset classes and regions.
Emerging Markets on the rise : LEM (Lyxor MSCI Emerging Markets UCITS ETF), weekly data
In Europe, the Stoxx600NR rose by + 2.1% thanks to very good PMIs, while the Markit Composite index was 58.1 points higher in December, its largest increase in almost seven years, thanks to an acceleration in the growth of the service sector and manufacturing activity in its main Member States.
In the US, indices set new records for the upside, with the S & P500 up + 2.2% driven by the oil sector and cyclical stocks. The monthly employment report published at the end of the week shows that fewer jobs than expected were created in December (148K against 190K expected) which leaves the possibility to the FED to continue its cycle of "progressive" tightening with a next step in March for the next rate hike. With strong economic growth (forecast at nearly 3% in 2018) and business confidence at such high levels, the United States should continue to create significant numbers of jobs. In addition, wage inflation has also increased, with average hourly wages increasing by 0.3% and over one year, wages have increased by 2.5%, in line with forecasts. All this could lead to a gradual return of inflation with a rise in long-term rates (10 years US is currently at 2.48%) and a possible acceleration of monetary tightening. This is the main risk for equity markets, which could be more likely to occur in the second half of the year.
Oil remained well above the $ 60 this week, which is due to lower stocks than expected in the US, but mainly because of fears about Iran, agitated by riots, while the government accuses "foreign forces" of paying demonstrators to destabilize the country. The risk of tensions with Saudi Arabia is increasing while the US and Israel are encouraging protesters and want new sanctions. Conversely, Iran may be under pressure to increase its exports despite OPEC agreements. For now the violent protests do not seem to have an impact on the country's oil production or exports, but the situation is very tense and could cause oil prices to skyrocket in the event of an escalation with Saudi Arabia.
The rise in rates and oil should come in support of the markets at first but could bring them down if this rise is too fast and large scale.
Strong Momentum on the Mining US sector : XME (SPDR S&P Metals & Mining ETF), weekly data
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The first week of the year was particularly positive, and broadly in terms of asset classes and regions.
Emerging Markets on the rise : LEM (Lyxor MSCI Emerging Markets UCITS ETF), weekly data
In Europe, the Stoxx600NR rose by + 2.1% thanks to very good PMIs, while the Markit Composite index was 58.1 points higher in December, its largest increase in almost seven years, thanks to an acceleration in the growth of the service sector and manufacturing activity in its main Member States.
In the US, indices set new records for the upside, with the S & P500 up + 2.2% driven by the oil sector and cyclical stocks. The monthly employment report published at the end of the week shows that fewer jobs than expected were created in December (148K against 190K expected) which leaves the possibility to the FED to continue its cycle of "progressive" tightening with a next step in March for the next rate hike. With strong economic growth (forecast at nearly 3% in 2018) and business confidence at such high levels, the United States should continue to create significant numbers of jobs. In addition, wage inflation has also increased, with average hourly wages increasing by 0.3% and over one year, wages have increased by 2.5%, in line with forecasts. All this could lead to a gradual return of inflation with a rise in long-term rates (10 years US is currently at 2.48%) and a possible acceleration of monetary tightening. This is the main risk for equity markets, which could be more likely to occur in the second half of the year.
Oil remained well above the $ 60 this week, which is due to lower stocks than expected in the US, but mainly because of fears about Iran, agitated by riots, while the government accuses "foreign forces" of paying demonstrators to destabilize the country. The risk of tensions with Saudi Arabia is increasing while the US and Israel are encouraging protesters and want new sanctions. Conversely, Iran may be under pressure to increase its exports despite OPEC agreements. For now the violent protests do not seem to have an impact on the country's oil production or exports, but the situation is very tense and could cause oil prices to skyrocket in the event of an escalation with Saudi Arabia.
The rise in rates and oil should come in support of the markets at first but could bring them down if this rise is too fast and large scale.
Strong Momentum on the Mining US sector : XME (SPDR S&P Metals & Mining ETF), weekly data