In the words of Gustave Flaubert, the great French author: “The thought of the future torments us, and the past is holding us back. That is why the present is slipping from our grasp.” This perfectly sums us what investors have been feeling over these first four months of the year and these last few weeks. They’ve been so concerned over prospects of another Great Depression that they’ve overlooked good signs from a global economy that is in fact growing, albeit at a slower pace. Business lending is now irrefutably on the rise in the Eurozone, companies such as L’Oréal and Danone are posting good quarterly results back to back and some emerging markets are stabilising as commodities rally from their low point at the start of the year. This isn’t enough to quell risk aversion, particularly with regard to European equities, but certain hard-hit sectors (commodities and banking) are regaining investor interest.
Oil prices remained relatively stable despite the stalemate at the Broha meeting on 17 April. If supply and demand don’t balance out, oil majors will freeze or cut investment programmes and send the sector into a period of underinvestment. Oil prices are therefore likely to be somewhat unstable.
Good quarterly results are not enough to justify revising up revenue forecasts for 2016 just yet, but it’s a good sign, indicating that margins are widening in the medium-term for European companies. In the latest news on the ECB, Mario Draghi has reaffirmed his commitment to driving the European economy and the exchange rate of the euro after the Governing Council’s meeting on monetary policy.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in April 22nd, 2016.
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