Latest from Lyxor
18 March 2019: Surfing a risk-on wave
All eyes were once again on Brexit last week as UK MPs backed a motion to delay it to 30 June. That delay could be extended later this week if a deal cannot be struck prior to the EU council meeting on 20 March. Regardless, risk assets found support as US equities rallied hard and dragged most other markets with them, even if trade talks remain a concern. Volatility fell, as did treasury and bund yields – which still look expensive to us. In the eurozone, a rebound in industrial production and renewed signs of life in German activity surveys have lifted sentiment.
Up next? Both the Bank of England and the Fed meet on Thursday. And we expect both to entrench their dovish paths. In truth, the BoE has little choice given all the uncertainty. A flurry of high frequency data could confirm a eurozone revival.
Latest performance
Source: Lyxor International Asset Management. Figures reported in local currency terms. Past performance is no guide to future returns. Data as at
Our key calls
Week commencing 18/03/2019
Higher carry strategies to outperform in the US
The Fed will pronounce on the rate path again this week. We expect no change to the dovish stance first hinted at in January. Investors will be looking for signs the balance sheet run-off will cease by year-end and confirmation that the path forward now projects just one rate hike in 2019.
An on-hold BoE boosts bonds
The key issue now on Brexit is the length of the exit deadline and its terms. The uncertainty means there’s little the BoE can do but keep rates on hold. Meanwhile, jobs and wages data (Tuesday) should show the economy is operating close to full employment. Core inflation could rise slowly as a result. An extension to Article 50 should prove mildly positive for the pound.
Domestic eurozone stocks to benefit from revival
Economic growth in the eurozone has slowed, but the worst is probably over. Forthcoming survey data should show more signs of life after the pick-up in Germany. We’re looking out for the trade balance (Monday) before moving on to consumer confidence (Thursday) and Preliminary Manufacturing & Services PMI (Friday).
Things we are watching out for
The Main Event
Lyxor strategists on the key moments in the week ahead
18
MAR
Other major events
4 more things to put in the diary
20
MAR
US Fed minutes
(forecast update)
21-22
MAR
European Council meeting
29
MAR
Brexit
28
APR
Spain snap general elections
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These are the views, opinions and recommendations of Lyxor International Asset Management (“LIAM”) Cross Asset and ETF research analysts and/or strategists as at 18 February 2019. To the extent that this research contains trade ideas based on macro views of economic market conditions or relative value, it may differ from the fundamental Cross Asset and ETF Research opinions and recommendations contained in Cross Asset and ETF Research sector or company research reports and from the views and opinions of other departments of LIAM and its affiliates. Lyxor Cross Asset and ETF research analysts and/ or strategists routinely consult with LIAM sales and portfolio management personnel regarding market information including, but not limited to, pricing, spread levels and trading activity of ETFs tracking equity, fixed income and commodity indices. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and reports. Lyxor has mandatory research policies and procedures that are reasonably designed to ensure that purported facts in research reports are based on reliable information and (ii) to prevent improper selective or tiered dissemination of research reports. In addition, research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, competitive factors and LIAM’s total revenues including revenues from management fees and investment advisory fees and distribution fees. Click here for more.