Stock markets in most of the world were positive this week. US indices rose on average by 1.2% and reached new highs. The average index for Europe rose by 0.1%. The average index of Emerging Markets rose 2.5%, led by Russia (5%), India and Brazil.
Government bond markets were generally a bit negative. The yield on 10-year US government bonds increased from 2.47% to 2.48%. A similar trend of slight yields increases seen in the UK and Germany.
US real indicators were mixed with a moderate negative trend. The disappointment from the growth in the fourth quarter, 1.9% versus expectations of 2.2% and annual growth of 1.6%. The strengthening of the US dollar last year mainly hit US exports that fell by 4.2%. A slight slowdown in the real estate sector recorded and a slight rise in unemployment claims.
Disappointment in demand for durable goods. Consumer sentiment was positive and better than expectations as the PMI services.
European real data continue to improve and the unemployment rate going down. Core inflation where 1% compared with 2% in the US. Financial companies in Europe, including finance, better than expected. Good data released in Germany.
President Trump signed on orders which represent the beginning of the implementation of the policy. The orders include bans the entry of Muslims from several countries to the United States, cutting regulation, health care reform freeze, freezing of budgetary expenditures in the areas of environmental protection, abortion, and assistance to the United Nations, an order to start preparations for the construction of the wall in front of Mexico and more.
The American president expresses his various positions, including support for Britain in front of the European Union, the Russian deep sympathy to Putin and hostile to China.
President Trump opposes rules of the globalization game in the areas of free movement of goods and investments around the world, oppose the global fight in pollution and global warming and is less sensitive than his formers to the US budget deficit issues.
The price of oil rose by 1.4%, the index of commodity prices fell 0.3% this week and per ounce of gold fell 1.6% this week. The dollar weakened against a basket of currencies by 0.2%. Fear Index (VIX) at historic lows.
There is a Russian and UK rapprochement to the US, alongside a growing tension between the US to Mexico and China. Expected a political change in the world order.
US earnings season will be the focus in the coming weeks when companies in the S & P 500 are expected to show growth of 3.8% in sales and 4.1% in net income versus the same quarter last year. So far, 170 companies in the report, with 73% beat earnings estimates and 51% of net sales projections.
Even China’s growth is not surprising in the fourth quarter and stood at 6.8% year over year. Later this year, growth is expected to decrease to 6.5% annually.
Inflation and inflation expectations continue to rise in the US (five-year inflation expectations from the capital market reached a level of over 2.0%). The market still expects two rate hikes in the US during 2017. Recently the chances upload as early as March.
The steps taken by the President of the United States during the first weeks in office, evoke echoes and increase the risk of a trade war, particularly against Mexico.
The Global Stock Market is facing a number of major challenges in 2017, including the uncertainty surrounding the policies of President Trump, and its implementation. Strengthening of the right-wing parties the Euro-skepticism in Western Europe for the elections in the Netherlands, France, and Germany, the ability of Japan and Europe show stable inflation and growth, at the background to the central bank operations, and the impact of monetary tightening is expected in the US on the currency basket.
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
Finance (VFH, XLF, KBE) – In view of improvement in corporate profits in light of the improvement in economic data in parallel projected rate hike.
Technology (QQQ, IGV, 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).