En Marche – Euro Zone is gathering momentum – Second Part

7 years ago - Published by Oddo BHF Asset Management in Finance, Fundamental Analysis

 

HH cons: Household consumption / Gov. Exp: Government Expenditure / GFCF: Gross Fixed Capital Formation / Net XM: Net exports
Source: ODDO BHF AM SAS, Thomson Reuters, Datastream, Bloomberg. Figures as of 28 August 2017.

– After an especially strong first quarter (+1.9% year-on-year), growth surprised once again in the second quarter (+2.2%). This pace is above potential and above its 2010-2015 average.
– Credit growth remains solid and beneficial to both companies and households
– Order books and economic surveys suggest that the positive trend will continue
– The political environment has become favourable after elections in France and the Netherlands

Source: ODDO BHF AM SAS, Bloomberg. Figures as of 29 August 2017. 

 

Deposit rates will probably remain unchanged (but not fall any further) for some time to come

Deflation risks are fading but the decline in unemployment is not enough to boost inflation

At its September meeting, the ECB:

– revised its growth forecasts upward (to 2.2% for 2017) and its inflation forecasts downward, due mainly to the shift in the euro exchange rate – despite a general rise of commodity prices;
– did not announce any new reduction in its asset purchases, while adding that all data needed to make a decision are likely to have been compiled by October;
– said that increased scarcity in bond supply is not reason enough to accelerate tapering.

 

Source: ODDO BHF AM SAS, Bloomberg. Figures as of 29 August 2017. 

 

Euro zone impact:

Reflects renewed confidence although strong euro is worsening earnings per share (EPS) outlook

Gain in growth is quite sufficient to offset the forex impact

Lower import prices are boosting consumer purchasing power

The ECB is less inclined to tighten its monetary policy

 

Our CONVICTIONS

 

 

 

Authors

Nicolas Chaput
Global CEO & Co-CIO

Laurent Denize
Global Co-CIO

Gunther Westen
Deputy Head of Asset Allocation

 

Disclaimer

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