Narrow majority for Trump health bill

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The past week saw the positive momentum in equity prices continue across the world, while bond prices lost some traction. The US House of Representatives handed President Trump a victory by narrowly approving a bill to repeal Obamacare and replace it with new healthcare legislation.

The Netherlands’ AEX enjoyed another balmy week, ending over a per cent higher. Ben Steinebach Ben Steinebach Head of Investment Strategy

Trump’s House victory is the first step in dismantling Obamacare. The bill is now heading for a vote in the Senate where Trump may need to compromise by offering even more than the USD 8 billion he promised in the House in compensation for the next few years.

The Federal Reserve’s Federal Open Markets Committee (FOMC) met in the week. The Committee was upbeat about the country’s economic prospects, considered the first quarter’s subdued growth a one-off and partly seasonal, and saw no obstacles to two additional rate hikes this year. In response, bond yields inched back up across the world.

In a separate development, North Sea Brent crude dipped back below USD 50 a barrel in the wake of lower than planned exports by OPEC countries and additional production in the United States. Another factor was the subdued mood among Chinese purchasing managers, with sentiment declining from 52.1 to 51.2. Following a robust first quarter – fuelled by government stimulus among other factors – the Chinese economy would appear to have peaked. This may well depress demand for oil.

France is anxiously awaiting the outcome of the final round in its presidential elections. Macron is being investigated for a secret bank account, but accuses opponent Le Pen of starting this rumour or ‘fake news’.

Equity markets across the world rose further in the week, China being the odd market out. European markets did significantly better than their US counterparts, reflecting the fact that, at over 2%, Europe’s economy did better than its American counterpart (1.7%).

Another good week in Amsterdam

The Netherlands’ AEX enjoyed another balmy week, ending over a per cent higher. Corporate figures were typically encouraging and the bellwether index moved in tandem with solid sentiment in Europe. 

The AEX index had a spring in its step, with financial services companies a key contributor in getting it well up, to 528. Biggest gainers were Gemalto (+6.3%), NN (+5%), KPN (+4.3%), ABN AMRO (+3.7%) and ING (+3.6%). The week’s list of losers was topped by ArcelorMittal (-4.4%), followed by SBM Offshore (-2.9%), Akzo (-1%) and Galapagos (-0.9%).

DSM started off the year in fine fettle. The markets were already primed for respectable growth, but the chemicals company even outstripped those expectations and repeated its stated outlook for the longer term. TKH released an impressive update, beating forecasts on all fronts and locking in organic turnover growth at a galvanising figure of nearly 11%, while also improving its operational margin by over a percentage point.

Shell also reported results ahead of expectations, with nearly all its divisions contributing. Integrated Gas did particularly well, while Downstream continued to defy expectations on the upside. Figures posted by Air France–KLM were more or less in line with expectations. Temporary employment agency Brunel disappointed, with the Netherlands accounting for a sharp drop in its turnover.

These Dutch companies were among many others reporting their results across the world. In Europe, Siemens released robust figures and strong order book growth, while results for Anheuser-Busch InBev, BNP Paribas and HSBC came in ahead of forecasts.

In the United States, Qualcom issued a profits warning in the wake of its licence dispute with Apple. Meanwhile, Apple itself recorded disappointing numbers, as iPhone sales fell and the company’s outlook for the quarter ahead dipped below that of the markets.

Results for Gilead Sciences likewise fell short of expectations. And while Facebook’s numbers may have turned out higher than projections, the markets took fright from the company’s comment that advertising income is likely to shrink ‘significantly’ in 2017.

Like many other US companies, Mastercard posted solid results. Investment guru Warren Buffett’s Berkshire Hathaway reported having sold off a large proportion of its stake in IBM as it had become less keen on the US technology company. Meanwhile, US car sales for April disappointed.

All eyes on France

Sunday’s presidential elections in France will have a greater effect on Europe’s future than would normally be the case, and markets are anxiously awaiting the outcome. The macroeconomic agenda is nice and full, while corporate news continues to pour in. 

By the time you read this, the United States will have released its labour market figures for April and you will know whether the expected 200,000 jobs have in fact materialised. The week ahead will also bring a slew of new data on manufacturing. Germany will be releasing March industrial orders numbers on Monday and reveal industrial output a day later. Both indicators had been nicely up in February. Fresh production figures are also due out for France, Italy, the United Kingdom, the Netherlands and the European Union at large.

Meanwhile, we’re eagerly awaiting the latest data on international trade from China, Germany, France and Japan, to help decide whether world trade will continue to be a key driver of global growth. China, the United States and Germany will also be releasing the latest figures for inflation in April. These are likely to be high, as the comparison with 2016 looks set to be influenced by Easter being in April this year. Lastly, provisional figures for May consumer confidence are due out in the United States.

In both Europe and the US, the corporate results season has passed its mid-point, and the week ahead offers a full slate of companies reporting results, including the likes of Ahold Delhaize, Aegon, ING, ArcelorMittal, PostNL and Eurocommercial Properties in the Netherlands. International names about to hit the headlines include, Adecco, Symrise, Walt Disney, Allergan, Aperam, Crédit Agricole, Telefonica and A.P. Möller-Maersk.

Ahold Delhaize’s release is slated for Wednesday. Like many food retailers, it is facing an uphill comparison for the first quarter, as Easter was late this year. Meanwhile, poor weather conditions are also liable to have rained on the company’s sales in the United States. Online sales are increasingly important and is predicted to report further growth. The good news is that deflationary pressures are easing, and that additional synergy benefits should help boost margins this year.

ING, which will publish its first-quarter figures on Thursday, is predicted to have had a solid three months driven by its Financial Markets division. The market consensus is looking for underlying net profits of EUR 996 million. Organic loan growth is generally expected to match the solid numbers recorded for the last quarter of 2016, with little pressure on margins. Lastly, the market expects ING’s capital ratio to have improved further.

Ending the corporate results week on Friday, ArcelorMittal is expected to come up with a somewhat mixed bag. Although it benefits from the continued strong global demand for steel, it is hurt by the rise in the price of iron ore needed to manufacture steel. That said, in both the US and Europe this arena enjoys favourable supply and demand conditions. The market is looking for first-quarter operating income of around USD 2 billion.


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