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Sycominute(s): August 2019

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The month of July was marked by disparate performances despite the reassuring speech of the central bankers and corporate results broadly in line with expectations. Macroeconomic indicators are lagging in Europe and the geopolitical situation generates instability in the markets, with the commercial war and the higher probability of a "hard Brexit". Analysis of our manager Arnaud d'Aligny.

Syco Minute

Generally speaking, equity markets closed the month back at their end of June levels, with the EuroStoxx TR index, for instance, up 0.1% during the month. Nevertheless, stock dispersion remained high: defensive sectors outperformed cyclicals, while undervalued stocks largely underperformed their more expensive counterparts.

For the first time since December 2008, the Fed cut its interest rate by 25 bp

Central bank decisions and statements continued to bolster the market: for the first time since December 2008, the Fed cut its interest rate by 25 bp, but declared that any future action would depend on upcoming macroeconomic data. The ECB, on the other hand, kept its rates unchanged but has put a possible rate cut and a further QE programme on the agenda for its September meeting.

Markets are expecting Christine Largarde – who will take over as the next President of the ECB in October – to continue with Mario Draghi’s accommodative policy.
The macroeconomic indicators published during the month, which were rather disappointing in Europe (Q2 GDP, IFO, Eurozone PMI), fed investors’ concerns. Similarly, on the political front, while Italy benefited from the ECB’s accommodative stance and from Brussels’ decision not to launch an excessive debt procedure against the country, the trade war and Brexit concerns revived investors’ anxieties. While talks have resumed between Xi Jinping and Donald Trump, no real progress has been reported yet; furthermore, the appointment of Boris Johnson as UK Prime Minister has also increased the likelihood of a hard Brexit.

At this point, 70% of the Stoxx600 companies have released their second quarter earnings. 57% have published better-than-expected sales and EPS figures.

The opinions and estimates constitute our judgment and are subject to change without notice, as well as assertions about trends in the financial markets, which are based on current conditions in these markets. We believe that the information provided in these pages is reliable, but it should not be considered exhaustive. These data, graphics or extracts were calculated or made on the basis of public information we believe to be reliable but which nevertheless have not been subject to independent verification on our part. Past performance is no guide to future returns.


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