Our Market Analysis : 25/11/2017

A week of rebound for the European indices with a rise of 0,77% for the STOXX600NR, which was not acquired at the beginning of the week given the failure of the negotiations for a "rainbow" coalition in Germany, but at the end of the week it seemed certain that the SPD, the other major formation besides the CDU, was willing to negotiate to form a new government with Merkel by reconsidering its initial decision to join the opposition. These negotiations are likely to last for some time and the uncertainty too, especially as the vote in Catalonia is also approaching on December 21st.

However, European activity indicators (purchasing indicators) show a recovery that is strengthening, particularly in France and Italy, which confirms the zone's growth prospects for 2018.

Weekly rebound in EuroStoxx600 (Lyxor ETF MSE) : weekly data

US indices have broken new records (+ 0.9% for the S & P500), despite a week shortened by the "black Friday".

The main event of the week is the oil prices that are at their highest for two years, because of a pipeline failure in the US, but mainly because of rumors about Russia and Saudi Arabia about the extension of the agreement on production cuts until the end of 2018. A crucial OPEC meeting is planned next week and should be key for the evolution of WTI prices which are at a pivotal level, up to the $ 43/59 trading range which is valid for almost two years, because in case of break out the upside potential would be very important and free the way towards $ 75. A significant increase in oil would have domino effects, with a probable increase in inflation and a possible impact on monetary policy on both sides of the Atlantic. In addition, exporting countries such as Russia and a number of emerging countries would be considerably strengthened. On the other hand, it would be quite negative for oil importing countries like Europe, China, India and the USA. The transportation sector will naturally be the most impacted by the rise in oil, while a number of industrial sectors will be favored.

Strong momentum on crude prices (ETF Powershares DBO) : weekly data

From a currency point of view, the Euro continued to rise against the dollar towards 1.19 and threatens to break through the 1.20 resistance, while rates remained fairly stable over the week