Bond Markets Rising

Weekly Economic Review – Government Bond Markets are Rising, Yields are Declining


Leading US stock indexes continue their journey north. 4Q/16 earnings season in the United States is approaching its end: so far, 460 companies have reported within the S&P500 with about 66% beat earnings estimates approximately 40% of the sales forecast.

Companies are expected to show growth of 4% in sales and 5.3% in net earnings growth compared year-on-year.

The positive long-term trend is continuing in the global stock markets, the leading US indices rose on average by 0.7%. European index was stable. emerging markets rose on average by 0.5%.

Government bond indices were positive this week, yields on 10-year US government bonds decreased from 2.4% to 2.31%. A similar trend was seen in the UK and Germany. We note that the government bonds of France, Spain, and Italy traded in a negative trend and rising yields there.

The economic indicators published this week in the US and Europe continue to be positive, sales of homes in the US are at a peak of a decade, a very positive consumer sentiment and inflation expectations rising to 2%. moderated but still positive. China’s trade volumes with Germany is reaching new heights and pushing to place both the volume of trade between China and the United States.

The PMI were moderate but still positive. China’s trade volumes with Germany is reaching new heights and “pushing” to second place the trade volume between China and the United States.

The American president continues to declare his economic intentions, increase in the cost of security and infrastructure, (including the Wall Mexican) he talks about deep cuts in corporate tax and emphasizes the need to impose a tax on the “rest of world”.

He attacks China for manipulating its currency.

The Fed’s protocol sets interest rate hikes are expected in the coming months, and stresses the US fiscal uncertainty in light of Trump Plan (increasing the deficit).

Increased instability in European markets due to fears of election results in some European countries, (France, Germany, and others).

The price of oil rose at 1.1%. Index of commodity prices fell this week at 0.65%. Per ounce of gold rose sharply at 1.8%. The dollar was up at 0.1% against a basket of currencies but strengthened against the euro 0.5%.

political

Differences in political positions on economics and politics between President Trump and his ministers, especially the Minister of Finance (which supports liberalizing global prods) and Ministers of Foreign Affairs, Defense and the new National Security Adviser thatch supporting good relations with the European Union and oppose aggravating relations with Iran and the Palestinians.

Total disconnect between Trump leading US broadcast networks

Conclusions

Global stock markets mostly embody the current pricing of “good news”, among others, against the background of economic viability and companies. However, the number of challenges currently facing in 2017, including: pricing is not cheap, uncertainty around policy trump, elections in the Netherlands, France and Germany, possible deterioration in the political situation in Italy and the return of the Greek debt crisis headlines. This, combined with the effect of monetary tightening is expected in the US currency basket, the era of expansions in Japan and Europe, supported adopting a conservative approach

Consumer Discretionary (IYC, XLY)- In view of the increase in income disposable light of the planned reform of the individual income tax.

Energy (XLE) – In view of the removal of environmental regulation, and support activities Locally.

Finance (VFH, XLF, KBE) – In view of the credit growth, net interest income, operating expense structure and quality of credit portfolios that show consistent improvement. Easing regulation of the financial system, improving consumer sentiment, an expected reduction in corporate and income taxes, disposable income and the improvement in revenue funding as a result of the increase in interest rates, supports in investment in the financial sector to the near future.

Technology (QQQ, VGT, FDN) – In light of conflicting effects on the bottom line of corporate tax reduction, on the one hand, and increasing regulatory supervision of the sector, on the other.

MSCI Europe / S & P Europe 350 (hedged) – In view of the positive effect of the expansionary monetary policy of the ECB on the profits of multinational companies (HEDJ).

Germany (hedged) – In view of the increase in revenues of export-oriented light of the weakness of the euro against the dollar (DXGE).

UK (hedged) – In view of the interest rate cut and positive growth and postponement of exit from the block will benefit private spending of leisure (DXPS).

Nikkei2225 (hedged) – In view of the monetary and fiscal expansion parallel to support the weak currency profits of exporters (DXJ).


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