In the wake of last week's global stabilisation, stock markets finally picked up solidly again during this past week. The driving force behind the gains is reasonable macro news from both the US and Europe.
The stock markets' recovery was primarily a result of mixed macro news being interpreted positively
Ben Steinebach Head of Investment Strategy
The purchasing managers' indices issued over the past week have been somewhat underwhelming, especially in manufacturing. However, there was encouraging news as well. In the US, the ISM index stabilised in January after several months of decline; in February it even ticked up, although the index remained below 50. China’s index edged lower to 49, but there, too, the pace of decline is slowing. As for Europe: despite a weakening backdrop, the index managed to avoid dipping below 50. That said, several other indices are starting to look more favourable. In the US, industrial production and capital goods orders increased over January, which suggests that the manufacturing sector is over the hump. Family incomes and spending were looking up as well in January. The industrial sector's positive development came as a mild surprise, as this January saw the same severe winter weather in the North-East that caused serious downturns in production in the two preceding years. In Europe, positive retail sales data for January was released last week, and the previously published December figures were revised upwards. These developments have lifted global stock market sentiment. In turn, the bond markets took a turn for the worse. The markets considered to be safe havens (the US and European core economies) saw bond prices decline and yields rise. The positive buzz lasted throughout the week in the US. In Europe on the other hand, there was a hitch on Wednesday, when news appeared that inflation had dipped below zero in February (-0.2% versus +0.3% in January).
Brunel pays super dividend
The stock markets' recovery was primarily a result of mixed macro news being interpreted positively. Over the past week, little business news was issued. As far as the final quarter of 2015 goes, the results season is drawing to a close. US agro-giant Monsanto announced revising its earnings forecast downwards for 2016. This is largely due to currency fluctuations, along with decreased purchasing power among agricultural buyers, whose margins are dwindling as a consequence of low agricultural commodity prices. Monsanto shares lost 7.8% after the announcement. In the Netherlands, business services provider Brunel (specialised in project management, secondment and consultancy) presented its Q4 results. These results met expectations, with Dutch and German activities performing strongly. However, as anticipated, all oil and gas-related activities contributed negatively. For 2016 , a further revenue decline has been projected. The company is paying a dividend of EUR 0.75 per share, and on top of that a super dividend of equal size, due to the extremely comfortable cash position at year-end 2015. Ahold, too, presented its results over Q4 2015. Net profit increased by 40% versus the year before. Although better than expected, this strong growth was largely attributable to a provision in 2014 which took quite a chunk out of earnings in that year. The dividend was increased by 8.3% to EUR 0.52 per share. Management sees growth potential for Albert Heijn (AH to go) shops in companies, universities, train stations and petrol stations. Delhaize, with which Ahold is about to merge, presented results which were good, though more in line with expectations than Ahold's. Nonetheless, sales were 15.6% up at EUR 24.4 billion, while operating income climbed by 18.2% to EUR 872 million . The merger is expected to be completed this summer. The AEX reached 433.95 on Thursday, 2.7% ahead of last Friday's figure, and thereby performing in line with most other European and US indices. Outperformers in Europe were Italy and Spain, while Asian exchanges gained 4 to 5%.
Waiting for the European Central Bank
The coming week will bring little news either, internationally speaking. On macro level all eyes are focused on the European Central Bank (ECB), which may announce an intensification of the incentive policy on Thursday. The only real business news highlights in the week ahead will be coming from a handful of smaller Dutch companies, including Aalberts, TKH (formerly Twentsche Kabel), Boskalis, Hunter Douglas, Van Lanschot, Beter Bed, and De Telegraaf Mediagroep. On a macroeconomic level, it will be a tame week as well. Data will be published on the Chinese foreign currency reserves in February, which will influence the country's ability to support its currency (the yuan). We are also looking forward to news on Chinese import and export trends and price developments in February. Second estimates will be published on GDP growth over Q4 2015 in Japan, the eurozone and the UK, and on industrial production in Q4 in France, Italy, and the UK. Still, investors’ attention will be primarily focused on ECB President Mario Draghi's press conference on Thursday. In the wake of February's negative inflation figures, it seems likely that further steps in the bond purchasing programme will be planned, as well as a further reduction of interest rates, taking them into negative territory. But first, this afternoon we will be looking at US non-farm payrolls. By the time this text has reached you, it will be clear whether the anticipated 200,000 new jobs actually materialised in February.