Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014 - (Page 20)
Generali Investments Europe's dedicated
macro-research team take stock of the latest developments on the European financial markets and share
their view on what might be coming.
LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°84 - JAN
/ FEV / MAR 2014
Over the last four weeks, financial market developments were dominated by the intense
fiscal battle in the US and the weaker macro data flow the partial government shutdown
has brought about. However, despite a notable loss of economic momentum in the US,
financial markets did well. Not only did the main stock markets register another handsome gain, both public and private credit spreads continued to tighten. What is more,
even core government bond markets rallied as yields fell further from the highs marked
at the peak of the tapering debate in June.
We attribute the positive market performance to the decline in political
risks during the month. Not only was a
(technical) debt default in the US averted,
political risks in Europe have also fallen.
Critical in this respect was the confirmation of the Letta government in Italy.
However, even more important - and perhaps counterintuitive at
first glance - was the softer macro data flow in the
and elsewhere. This has
led markets to expect an
policy stance for longer
than anticipated before.
Expectations of Fed tapering (which was widely
expected in September)
has now been pushed back
into late Q1 2014.
Perceptions about monetary policy will probably
continue to set the tone
for markets during the
coming weeks. In this
respect, we believe that the shutdownrelated distortions in the data flow
(reduced visibility, lower sentiment etc.)
are likely to keep perceptions about delayed tapering alive. So unless incoming
data signals were to change from 'soft'
to 'weak', all asset classes are likely to
continue to benefit from the ultra-loose
policy stance of the Fed.
Looking beyond the period of a murky
US data flow, much will depend on the
strength of the incoming signals. In this
respect, we anticipate a repeat of the
pattern seen over the previous three
years, when growth scares proved temporary. We maintain our view that due
to a combination of a lower fiscal drag,
rising external demand, still favourable
financial conditions, and lower energy
prices, the US economy will accelerate
again over the turn of the year.
Until then, changing 'taper on/taper off'
moods will lead to a more volatile market
environment. Possible market corrections
will depend on the extent of the rally
induced by central bank liquidity before.
The more risky assets will rise without an
accompanying improvement in macro
fundamentals, the thinner the ice will
get. Once the US economy
regains traction and the Fed
starts to signal reduced bond
purchases, investors should
brace for interruptions in
the secular upward trend in
markets. However, with the
notable exception of core
government bonds, losses
should prove contained and
temporary in nature.
In the Euro area, the rise in
business confidence came
to a halt. The composite
PMI receded to a reading of
51.5, still in expansionary
territory. A breakdown by
sectors shows that services
sentiment suffered while the
mood in the export-oriented manufacturing sector continued to advance.
The same pattern could be observed in
the EC survey but here overall sentiment
Table des matières de la publication Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW Martin Sadleder- Treamo Business Consulting
15 MINUTES WITH CRX Markets
THE FINANCIAL RISK OBSERVATORY
Trésorier/Treasurer magazine - N°84 - Jan/Feb/Mar 2014