Monday was Draghi’s meeting at Strasburg. We’ve had a rather positive signal from the President of the ECB, who confirmed that the economy is growing, but that inflation is still expected. No duration as to when the QE program stimulus in the economy is planned to be interrupted was mentioned (officially up until September 2018). As European January Core CPI Y/Y ended the year at 1.30% (December 1.40%) and EU 10Y Bond yields are maintained at 0.736%, there is clear signs that EU equities have not ended their rally.
Yesterday was a tough day for equities who lost more than 4% in the US and Asia, while the EU remained robust and barely lost 1.26%. In the context of strong risk-off and US Government Bonds yields at 4 years high, we’ve surely assisted to a big shift in US investors’ portfolio allocation.
Accordingly, in the context of a weaker greenback, we see that EU inflation will be partially suppressed and Bond yields maintained at these rates, supporting continuous stimulus in the economy. For these reasons, investing in European market remains attractive for investors in the coming periods.
By Vincent Mivelaz