August 18, 2017

A week marked by the Barcelona terror attacks

Management comment

There was no major economic or financial newsflow last week. Markets were erratic and generally less bullish than before the summer. The tragic terrorist attacks in Barcelona served as a reminder that Europe is still under threat, whilst simultaneously attempting to absorb or stem migratory pressure. Terrorism failed to curb the economic dynamism in Europe however. Unemployment in France fell for the eighth consecutive quarter and now stands at 9.2%. The 8.5% threshold could be breached next year. The uptick in the employment rate, albeit belated, reflects the strength of eurozone growth and the economic recovery in France. Measures implemented by the new government under President Macron should be disclosed during the 2018 budget law debate. It may be wise to increase French equity weightings if the campaign promises (or even only some of them) are honoured.

Meanwhile, some key international balances have been restored, with the dollar stabilising at 1.17 against the euro, after a sudden unexpected bout of weakness, while the oil price continued to fluctuate in the USD 45-50 corridor (WTI). Interest rates remained imperturbably too low, which should nonetheless provide further excellent acquisition opportunities for companies able to leverage heavily thanks to their strong cash-flow profiles. The end of the summer recess may therefore see renewed M&A deal flow. Portfolio positions should also focus on this theme.

Meanwhile, investors could capitalise on intra-day fluctuations to set up tactical long positions.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in August 18th, 2017.

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There was no major economic or financial newsflow last week. Markets were erratic and generally less bullish than before the summer. The tragic terrorist attacks in Barcelona served as a reminder that Europe is still under threat, whilst simultaneously attempting to absorb or stem migratory pressure. Terrorism failed to curb the economic...
2017-08-18