October was a positive month as energy prices continued rising and cash was redirected to markets. Markets continue their stellar performance throughout this year and especially technology and energy stocks take the league. Banks and financials at the bottom with pharmaceuticals, transportation and retailers in the middle.
In the US, GDP was announced at 2% for the third quarter coming from a high 6.7% in the previous one. Imports and exports increased by $5 and $1 billion accordingly and natural gas storage continued to increase from 88 bln to 188 bln. Non-farm payrolls were much higher than before from 166k to 194k and unemployment at 4.8% (from 5.2%). Core inflation in September was stable at 4% YoY and from 0.1% to 0.2% on a monthly basis. Retail sales diminished from 0.9% to 0.7% and in the real estate, market had a mixed image with building permits lower at 1.59mln (from 1.72), new home sales also lower at 1.55mln but existing home sales much at 6.3mln from 5.9mln.
In Europe, some minor corrections, last days as a chancellor for Angela Merkel, sanctions to Poland and the inflation menace were the characteristics of the month. Christine Laguarde reassures that ECB will intervene when and where necessary but some days investors are more weary. Eurozone inflation increased from 3% to 3.4%, retail sales from negative change to 0.3% and industrial production further below at -1.6%.
In Greece, there was another listing of a corporate bond issue (CPLP) at the stock exchange which was halted for 5 hours due to technical problems on the day of its first session. Volume to remain low enough and problematic economic indicators (debt to GDP, unemployment, high taxation) does not help it recover even though real estate and retail sales seem to have a strong upward trend. Banks are at red with 1 out of 2 loans unpaid.
The EUR/USD moved towards the 1.15 mark, and it is expected to remain at lower trend short term mainly due to ECB’s policy for tapering.
Going forward, investment wise, we prefer American equities for the energy sector and the epicenter stocks, holding the technology sector especially the FANGs as it is with the start of moving to an increase position of European equities on a com-parable valuation thesis.
S&P-500 (10-month chart)
EuroStoxx-50 (10-month chart)
EUR/USD (10-month chart)
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