Views and Ideas

The US growth in the first quarter has been revised upwards (+1.2% vs +0.7% initially estimated)

30 May 2017

Global market sentiment was balanced last week. Investors’ focus seems to have shifted from US political uncertainty to strong macroeconomic fundamentals and a more constructive global growth forecast.

US equities rallied to a new record high post FOMC minutes, EM markets rebounded strongly despite Moody's downgraded China's credit rating (from Aa3 to A1). Only European markets traded lower and core yields fell slightly.

The main focus this week were the OPEC meeting and the FOMC minutes in US.

As expected, OPEC members had agreed to extend oil production cuts for an additional 9 months through March 2018, but the market seems to be disappointed with oil prices dropping again below 50 USD.

FOMC minutes confirmed that the outlook justifies taking another step quite soon in the tightening of monetary conditions. A June rate hike remains on the table and is largely priced in by the market.

In Europe, all macro data continued to be very robust. PMI surveys indicate that the Eurozone growth remained very strong as Manufacturing PMI rose to 57.0 after reaching 56.7 for the previous month. Furthermore, IFO German business confidence rose to the highest level since 1991.

In the US, economic data published last week was rather mixed. The real estate market remained weak in April as both new home sales and existing home sales surprise significantly to the downside.

Markit flash composite PMI surveys showed few signs of improvement of business activity following the weak start of the year. The index rose for the second month to 53.9 in May.

Finally, US growth for the Q1 was revised upwards. GDP rose at +1.2% annualized rate, revised from +0.7% as consumption and business investment contributed more than expected.

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