Equity markets mixed

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Equity markets produced a varied assortment of decent gains and sizeable losses on a deluge of news to get the markets moving. The macroeconomic picture was unchanged, driven by the release of the final confidence figures.

Next week’s macroeconomic agenda isn’t exactly full, but it does feature a few key numbers. The corporate agenda remains empty. Ralph Wessels Investment Strategist ABN AMRO MeesPierson

Asia was mixed, with Japan recording gains and China suffering major losses. Europe recorded a net fall of over 1%, mainly due to Friday’s losses in the wake of the after-market postponement of the vote on the new US tax plans. Previously, a vote and the adoption of the new plan had seemed likely. At the time of writing, markets in the United States have yet to open, but their week looked better, if mixed. The NASDAQ is virtually unchanged. The Dow Jones index advanced by over 3% and the Dow Jones Transportation index even managed to lock in weekly gains of nearly 7%. Market gains were fuelled by unequivocally healthy confidence indicators for the manufacturing industry in November – already at extremely high levels in Europe and the US. This can’t last forever, of course, but the surprise is that they’ve done so well for so long.

In what was probably her last testimony before Congress, Chair Janet Yellen reported that economic growth is increasingly broad-based, while the new chair-in-waiting Jay Powell provided a stock market boost to financial companies by intimating he’s not eager to further tighten regulation. He also suggested the labour market could improve more without fanning inflation.

The UK and the EU have made progress and are reported to have reached agreement on the divorce settlement. Rumours suggest that the UK will pay in a net EUR 45-55 billion over the next few decades. OPEC and Russia agreed to extend production restrictions through to the end of 2018, but oil prices barely moved on the news. The same can’t be said for Bitcoin price trends. The digital currency smashed through the 9,000, 10,000 and 11,000 dollar marks this week, only to plunge by nearly 20% and then shoot back up to just below USD 10,000. The madness continues unabated and opinions remain sharply divided. Interest rate markets were virtually unchanged in the week that was.

AEX: Hold the celebrations

The AEX index was on a firm upward trajectory until Wednesday afternoon, but then lost all gains to end the week lower – albeit that it did do a tad better than other European markets.

The Amsterdam gauge lost 0.7% in the week and now stands at around 537. The week’s winners included Shell and Vopak, which benefited from the new OPEC deal. NN was also rewarded for its new plans. Ahold made the biggest progress, as its Bol.com operations should ride the shopping bonanza in the holiday and shopping month of December. Online records are expected to be smashed again. A trading update from a.s.r. showed results, profitability and the Solvency II capital ratio all in line with expectations. NN Group, another Dutch insurer, hosted its analysts’ day, revealing slightly higher-than-expected targets for cost savings and free cashflows. That said, restructuring costs are also likely to be a tad higher and its dividend policy remains unchanged.

Shell, too, held its annual analysts’ day. There were three main takeaways: 1) Shell will switch to a full cash dividend from the fourth quarter this year; 2) it has upped its guidance on 2020 organic free cash flows to USD 25-30 billion, an increase of 20–25% on constant corporate capital spending; 3) it has committed to carbon reductions in line with the Paris climate agreement. Lastly, at its analysts’ day Unilever emphasised a primary focus on growth and reiterated its targets of 3-5% underlying annual growth in the 2017-20 period and profitability at 20% in 2020.

Akzo’s extraordinary general meeting held few surprises, with shareholders agreeing to the company hiving off its Specialty Chemicals division. Akzo is still investigating its options of either simply selling or going for an IPO, but the proceeds will be nearly fully paid out to shareholders. In fact, the company will take an advance on any deal by paying out EUR 1 billion in cash next week as a special dividend.

SBM Offshore settled with US public prosecutors in the Unaoi corruption scandal and will pay a USD 238 million fine, in line with expectations. Lastly, Philips sold a 12% stake in Philips Lighting, leaving the company with a remaining holding of 29%.

In the international arena, the United States saw technology majors such as Facebook, Alphabet, Amazon, Tencent etc. sold off on Wednesday, for no obvious reasons. Investors were thought to be taking profits on excellent share price performances in the year. Uber Technologies, as yet unlisted, has caught the eye of a consortium comprising SoftBank and other investment players. They are reported to be looking to invest USD 6 billion in Uber in return for a share in the company. This potential deal values Uber at USD 48 billion, well below a previously touted USD 68 billion. Airbus, Rolls-Royce and Siemens have joined forces to build and fly a passenger plane powered by hybrid electric motors. Meanwhile, Siemens is planning to seek a Frankfurt stock market listing for its Healthcare division. Amazon aims to bring its Alexa digital assistant to the work floor as a smart business tool. And lastly, rumour has it that Broadcom does not plan to raise its USD 70 per share bid for Qualcomm.

Key figures on the menu

Next week’s macroeconomic agenda isn’t exactly full, but it does feature a few key numbers. The corporate agenda remains empty.

On Tuesday, market attention will be riveted on services confidence indicators for November, with the eurozone’s services PMI predicted to rise to 56.2 from 55.0 in October. The US is expected to see a slight fall in its ISM non-manufacturing index to 59.0 from 60.1. Figures on October retail sales in the eurozone are due out on the same day, with markets looking for annualised growth of 1.4%. Industrial production figures for October are scheduled to be released in Germany and France later in the week, with markets pegging annualised growth at 4.3% and 2.8% respectively. 

On Friday, Germany will also publish its trade balance figures. These can be volatile from one month to the next, but typically give some indication of the state of global trade. In the US, eyes will mostly be trained on the November jobs report, with Wednesday’s ADP data providing a first inkling. The market consensus puts the employment increase at 190,000 jobs. Non-farm payrolls are due out on Friday –markets are forecasting it to show jobs up by 210,000. Unemployment is expected to be unchanged at 4.1%. Wage trends will be closely watched, as these affect inflation and consequently also the Federal Reserve’s interest rate policy.

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