This week was full of contradictions, which lead once again to flatness (-0,5% for the Stoxx600 and flat for the S&P500).
It was also a rich enough period with both positive and negative developments. Firstly, the Q2 corporate results are so far of good quality and exceed the expectations in Europe and the USA with encouraging prospects for the second half of the year, which is excellent news confirming a new cycle of rising profits has begun, and is expected to translate into a virtuous circle of lowering unemployment, rising consumption and increasing investment.
Moreover, Greece has just confirmed its come back to the markets with its first bond issue for 3 years. It raised 3 billion euros at 5 years in a transaction appreciated by investors. Demand reached 6.5 billion euros, more than twice the supply. The yield offered is 4.625%, lower than the yield the country had granted on the same maturity (4.95%) three years ago. It is a strong symbol of the end of the European crisis, the reduction of the Greek debt stock - unsustainable - is expected to take place in 2018.
In line with these improvements in Europe, the Euro Dollar continues to rise reaching 1.17 and is beginning to threaten certain European sectors such as aeronautics or technology of which revenue is in US dollar while costs are mainly in euros. Beyond the level of 1.20 this would have material consequences for a number of players in Europe which begin to weigh on the markets. On the contrary, the fall of the dollar benefits the US indices because US companies are very present in Europe with dollar costs. The other beneficiaries of the fall in the dollar are commodities, which become cheaper in foreign currencies and are therefore more attractive from a European or Asian point of view and as a result emerging countries that see their currency appreciate with a reinforced effect by the rise in commodity prices. These include the rise in copper that accelerated this week.
JJC (Copper) : Weekly data
Basic Resources Europe (BRE) : weekly data
Moreover, new geopolitical tensions are rising, particularly the confrontation between India and China in Bhutan, which could end out as a military "remake" of the 1962 war and potentially a "black swann" "For the global economy, because the two Asian giants are definitely the two world growth drivers. Less disturbing but closer to Europe, tensions between Germany and an increasingly authoritarian Turkey does not bode well for the future, both for European security and Turkish growth.
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This week was full of contradictions, which lead once again to flatness (-0,5% for the Stoxx600 and flat for the S&P500).
It was also a rich enough period with both positive and negative developments. Firstly, the Q2 corporate results are so far of good quality and exceed the expectations in Europe and the USA with encouraging prospects for the second half of the year, which is excellent news confirming a new cycle of rising profits has begun, and is expected to translate into a virtuous circle of lowering unemployment, rising consumption and increasing investment.
Moreover, Greece has just confirmed its come back to the markets with its first bond issue for 3 years. It raised 3 billion euros at 5 years in a transaction appreciated by investors. Demand reached 6.5 billion euros, more than twice the supply. The yield offered is 4.625%, lower than the yield the country had granted on the same maturity (4.95%) three years ago. It is a strong symbol of the end of the European crisis, the reduction of the Greek debt stock - unsustainable - is expected to take place in 2018.
In line with these improvements in Europe, the Euro Dollar continues to rise reaching 1.17 and is beginning to threaten certain European sectors such as aeronautics or technology of which revenue is in US dollar while costs are mainly in euros. Beyond the level of 1.20 this would have material consequences for a number of players in Europe which begin to weigh on the markets. On the contrary, the fall of the dollar benefits the US indices because US companies are very present in Europe with dollar costs. The other beneficiaries of the fall in the dollar are commodities, which become cheaper in foreign currencies and are therefore more attractive from a European or Asian point of view and as a result emerging countries that see their currency appreciate with a reinforced effect by the rise in commodity prices. These include the rise in copper that accelerated this week.
JJC (Copper) : Weekly data
Moreover, new geopolitical tensions are rising, particularly the confrontation between India and China in Bhutan, which could end out as a military "remake" of the 1962 war and potentially a "black swann" "For the global economy, because the two Asian giants are definitely the two world growth drivers. Less disturbing but closer to Europe, tensions between Germany and an increasingly authoritarian Turkey does not bode well for the future, both for European security and Turkish growth.