>>> What to look at today - 25th of April

Dow +1.05% S&P +1.08% Nasdaq +1.24% Russell +1.31%
US MArket closed higher pushed by higher Euro & Positive outcome from french elections. Equities finished higher around the globe following the French vote with France's CAC (+4.1%) leading the charge, settling at its highest mark in nearly a decade. Likewise, U.S. equities jolted higher at the start of Monday's session, however, they had a difficult time adding much to the early gain. Several factors can be attributed to capping the bullish sentiment, but the leading culprit was the possibility of a U.S. government shutdown. Congress will return from its spring recess tomorrow, giving legislators just four days to pass a new spending bill and keep the government afloat. The deadline was expected to be a non-event as it's in no party's interest to force a closure, however, reports indicate that President Trump may attempt to leverage the situation to fund his promised barrier along the U.S./Mexico border. The aggressive tactic could definitely complicate matters. President Trump is aiming to lower the corporate tax rate to 15.0%, according to today's report from The Wall Street Journal. Crude settled 0.8% lower at $49.23/bbl. HUM +3%, RRC +3%, AA +2% higher on earnings/guidance... ESRX -15%, SWFT -6%, ABX -3.6%, CNI -1.6%, WHR -1% lower following earnings/guidance, WPZ -1.7% cuts dividend. Asian indices continued to trend higher, tracking outsized rally on Wall St on the heels of market-friendly French presidential elections Round 1 results.

Nikkei +1.08% Hang Seng +1.01% CSI +0.33% Shanghai +0.26%

Eur$ 1.0867 CNH 6.8855 CNY 6.8838 JPY 110.25 GBP 1.2797 CHF 0.9958 RUB 55.76

SPX +0.18% EuroStoxx +0.48% FTSE +0.24% Dax +0.36% SMI +0.37%

Macro :
- Trump Said to Order Push to Cut Corporate Tax Rate to 15%: WSJ
- Macron Would Get 64%, Le Pen 36% in 2nd Round: Elabe Poll
- Iran Seeks $3b Funding to Build 480k B/D Condensate Plant

Keep an eye on :
- ABBN VX : ABB Ties With IBM to Develop Decision-Making Factory Robots
- AKZA NA : Akzo Nobel Must Enter Talks With PPG: Columbia Threadneedle
- ABS US : Albertsons Said Exploring Bid for Grocer Whole Foods: FT
- AZA IM : Alitalia Workers Vote Against Restructuring Plan: Uiltrasporti
- ASMI NA : ASM Int. RAISES EU248M From 5% Stake Sale in ASMPT
- ATO FP : Atos Lifts Outlook for 2017 Revenue Growth, Operating Margin
- AIXA GY : Aixtron Sees FY Rev. EU180m-EU210m
- BKG LN : Unsold London Homes Under Construction Hit Record as Sales Fall
- CO FP : Casino Cut to Junk by Fitch, Citing Weaker Growth at Core Market
- ACA FP : Credit Agricole May Buy Italy’s Caricesena, Carim, Carismi
- DEC FP : JCDecaux to Appeal Paris Contract Decision at Council of State
- CDI FP : LVMH to Buy Christian Dior Couture; Arnault Christian Dior Bid
- EI FP : Essilor 1Q Rev. EU1.96b
- ERICB SS : Ericsson 1Q Net Sales Miss Est.
- FRE GY : Fresenius Said Near Deal to Buy Akorn, Reuters Says
- LONN VX : Lonza Raises 2017 Sale Growth Target, Sees Stronger Core Ebit
- LONN VX : Lonza to Replace Actelion in Swiss SMI Index From May 3
- METSO FH : Metso Raises Outlook for Mining Services; Net Sales Beat Ests.
- NOVN VX : Novartis 1Q Core EPS Cont. Ops. Beats Est.
- NN NA : NN Group Holder FNO Offering ~8.75m Shares via Bookbuild
- UG FP : Paris Prosecutor Starts Probe Into Peugeot Diesel Engines
- PHIA NA : Philips Doesn’t See Itself as Takeover Target, CEO Tells FAZ
- SCHP VX : Schindler’s 1Q Results Solid, Modest Consensus Upgrades Seen: MS
- STL NO : Statoil EVP Dodson: Expects at Least 1 Find in Barents This Year
- TEF SM : Telefonica Said to Weigh IPO for U.K.’s O2 as Soon as Year End
- UMI BB : Umicore FY Adj. Ebit View Midpoint Trails Est.
- VIV FP : Vivendi Seen Accelerating Expansion in Video Games, Ads: Reuters
- VOLVB SS : Volvo 1Q Adj. Operating Profit Beats Highest Est.
- WFM US : Albertsons Said Exploring Bid for Grocer Whole Foods: FT
- WTB LN : Whitbread FY Underlying Pretax Beats Ests.

>>> CDI / LVMH - First view & Comment

The mother of all trades is in play: Dior / LVMH
I'd take profits on the CDI / MC obviously. Let s see where it opens

Arnault is paying in RMS FP shares at 8x sales for 1/3 roughly of the mixed offer ...
Dior has a much cheaper valuation ...

Also, what will the taxman say regarding RMS shares fiscality ? Arnault is giving out his RMS shares which carry a hi capital gain I d think

Price of 260E is a bit low. I have a 270E NAV on Dior at yesterday but I have a little less debt than they do.

Tempted to short it to be honest ... If goes to 270E level ...

>>> Europe : Brokers Upgrades & Downgrades - 25th of April 2017

>>> Up
*Baloise Raised to Neutral at JPMorgan, PT CHF165
*Carillion Raised to Overweight at JPMorgan, PT 292p
*KBC Raised to Buy at HSBC, PT EU72
*Millicom Raised to Hold at ABG, PT SEK500
*Porsche Raised to Buy at SocGen, PT EU66
*SSAB Raised to Hold at Pareto Securities, PT SEK38
*SSAB Raised to Add at AlphaValue
*Weir Raised to Overweight at JPMorgan, PT 2,175p

>>> Down
*Antofagasta Cut to Sell at Goldman
*Aker Solutions Cut to Hold at Pareto Securities
*Atlantia Cut to Neutral at UBS
*Atos Cut to Hold at SocGen, PT EU119
*Atos Cut to Equal-weight at Barclays
*BHP Cut to Sell at Goldman, PT 1,100p
*Gemalto Cut to Hold at SocGen
*Glaxo Raised to Hold at Erste Group
*Investor AB Cut to Neutral at Swedbank, PT SEK405
*Nyrstar Cut to Neutral at Goldman
*Philips Cut to Hold at SocGen, PT EU35
*ProSieben Cut to Underperform at Macquarie, PT EU32
*Red Electrica Cut to Hold at Deutsche Bank
*Sartorius Cut to Reduce at Equita SIM, PT EU66
*Stabilus Cut to Hold at Bankhaus Lampe, PT EU65
*Stora Enso Cut to Hold at DNB Markets, PT EU11.70


>>> initiation
*All for One Steeb New Buy at Baader-Helvea, PT EU75
*Amundi New Outperform at Credit Suisse on Scale, Efficiency
*Coloplast New Sell at Erste Group
*Kering New Buy at Erste Group
*Prosegur Cash New Buy at Goldman, PT EU2.45
*Prosegur Cash New Buy at HSBC, PT EU2.75

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: Trump keeps the pressure on North Korea, defers on border wall funding; CAD under pressure as US protectionism looks north

***US Session Highlights***
- (US) Mar Chicago Fed National Activity Index: 0.08 v 0.50e
- (US) APR DALLAS FED MANUFACTURING ACTIVITY: 16.8 V 17.0E; New order growth rate: 5.1 v 3.2 prior
- US and EU stocks were given a boost of confidence today after yesterday's first round of French presidential elections put mainstream candidate (and likely eventual winner) Macron into the second round. Investors returned to risk in a big way, sending the Dow to jump 176 points at the open. Financials were the outperforming sector for the S&P, gaining 2.27%. Fixed income continued to pay the price, as the 10-yield rose back above 2.30%.

***US markets on close: Dow +1.1%, S&P500 +1.1%, Nasdaq +1.2%***
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Real Estate
- Biggest gainers: BCR +19.5%; HAS +5.7%; XLNX +3.0%
- Biggest losers: BDX -4.4%; KIM -2.9%; MU -2.8%
- At the close: VIX 10.8 (-3.8pts); Treasuries: 2-yr 1.23% (+4.5bps), 10-yr 2.27% (+3.7bps), 30-yr 2.93% (+3.2bps)

***US movers afterhours***
- UIS Reports Q1 $0.30 v $0.11 y/y, R$664.5M v $626Me (1 est)- Affirms FY17 R$2.65-2.75B v $2.70Be, FCF $130-170M (prior R$2.65-2.75B, FCF $130-170M); +12.6% afterhours
- LLNW Reports Q1 $0.02 v $0.00e, R$44.7M v $43.4Me; +11.6% afterhours
- HUM Pre-announces Q1 $2.75 v $2.43e, R$13.5B v $13.6Be; Raises FY17 guidance; +2.8% afterhours
- WHR Reports Q1 $2.50 v $2.67e, R$4.79B v $4.76Be; Cuts FY17 GAAP guidance; -1.8% afterhours
- ABX Reports Q1 $0.14 v $0.24e, R$1.99B v $2.18Be; -3.6% afterhours
- ESRX Reports Q1 $1.33 v $1.32e, R$24.7B v $25.0Be; discloses Anthem intends to move its business when the current contract expires in 2019; -14.9% afterhours

***Politics***
- (US) Pres Trump believes he can get funding for the border wall either now or in Sept - One America News Network

***Key economic data***
- (JP) JAPAN MAR PPI SERVICES Y/Y: 0.8% V 0.7%E
- (KR) South Korea Mar Consumer Confidence: 101.2 v 96.7 prior (6-month high)

***Asia Session Notable Observations, Speakers and Press***
- Asian indices continued to trend higher, tracking outsized rally on Wall St on the heels of market-friendly French presidential elections Round 1 results. Hang Seng is up nearly 1% with banks leading the way, while Nikkei225 remains supported by softer JPY. Japanese Telecoms are particularly soft on speculation of discounting due to competition in the sector, and industrials are performing strongly. Australia is on holiday for Anzac day.
- In FX, EUR and AUD were rangebound against the greenback, while NZD retreated below $0.70. Kiwi weakness partially attributed to trade protectionism stateside, as US Commerce Ministry determined that Canada softwood lumber exporters get subsidies, applying a 20% tariff, also warning it may put an import tax on Canadian dairy products. USD/CAD spiked up over 50pips above 1.3550 - highest level since late December on the protectionist posturing, just as Canada govt ministers Freeland (Foreign Affairs) and Carr (Natural Resources) condemn "unfair and punitive" dutes on softwood lumber.
- US political risk of govt shutdown was dialed down to a simmer, with US President Trump claiming he could wait on funding the southern border wall to avert an impasse with Congress. Geopolitics on the Korean peninsula remain tense however as US administration officials will hold a session with the full Senate abouth the North Korea threat on Wednesday.

China
- (CN) China said to have indicted former Stats Bureau head Wang on bribery - Chinese press
- (CN) China issues plan for medium and long term auto sector development

Japan
- (JP) Japan Fin Min Aso: Economy has prospered due to benefits of free trade
- (JP) BOJ Dep Gov Iwata: Doing internal simulations of exit from QE; Too early to discuss exit externally

Korea
- (US) President Trump has called on the UN Security Council to be prepared to impose additional sanctions against North Korea’s nuclear and ballistic missile programs; Says now is the time to solve the problem of North Korea - financial press
- (KR) South Korea Nuclear Envoy Chief: Discussed with US, Japan counterparts ways to gain cooperation from China and Russia on North Korea

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.8%, Hang Seng +0.9%, Shanghai Composite +0.4%, ASX200 closed, Kospi +0.5%
- Equity Futures: S&P500 +0.1%; Nasdaq +0.1%, Dax +0.2%, FTSE100 +0.3%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0850-1.0870; JPY 109.60-110.20; AUD 0.7550-0.7570; NZD 0.6985-0.7015
- June Gold -0.2% at 1,275/oz; June Crude Oil +0.5% at $49.46/brl; July Copper +0.7% at $2.58/lb
- SPDR Gold Trust ETF daily holdings rise 1.5 tonnes to 860.2 tonnes; 2nd straight increase
- Goldman Sachs continues to expect pressure in Gold prices with 3-month target of $1,200/oz; Medium term target remains at $1,250/oz - press
- (CN) PBOC SETS YUAN MID POINT AT 6.8833 V 6.8673 PRIOR; Weakest Yuan fix since Apr 18th; biggest margin of weakness since Mar 7th
- (CN) PBOC to inject combined CNY80B v CNY30B prior in 7-day, 14-day and 28-day reverse repos, 6th straight injection

***Asia equities / Notables / movers by sector***
Japan
- JSR (4185) +0.9%; FY16/17 results
- NEC (6701) +3.8%; FY16/17 results
- Lixil (5938) -4.3%; FY16/17 results
- Kose (4922) +1.2%; FY16/17 results
- NTT Docomo (9437) -2.1%; FY17 results speculation
- Mazda (7261) +1.8%' FY17 result speculation

Hong Kong
- AAG Energy (2686) -1.6%; Q1 results
- Northeast Electric Development (42) +0.9%; Q1 results

Korea
- Korea Zinc (010130) +2.3%; Q1 results
- SK Innovation (096770) +3.0%; Q1 results
- SK Hynix (000660) -0.8%; Q1 results

>>> US After Hours


After Hours Summary: HUM +3%, RRC +3%, AA +2% higher on earnings/guidance... ESRX -15%, SWFT -6%, ABX -3.6%, CNI -1.6%, WHR -1% lower following earnings/guidance, WPZ -1.7% cuts dividend

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: UIS +13%, LLNW +10.5%, LXU +5.4%, SLCA +3.6%, HUM +2.9%, RRC +2.8%, AA +2.3%, RE +1.9% (ticking higher), WNC +1.9%, ICHR +1.7% (also commences public offering of 4,500,000 ordinary shares by selling shareholders), AMP +0.9% (ticking higher; also approved 11% increase in quarterly dividend and additional $2.5 billion share repurchase authorization)

Companies trading higher in after hours in reaction to news: IMGN +3.4% (Highbridge Capital discloses passive stake), ZSAN +2.5% (continued strength), CVS +2% (higher on news that Anthem will end its relationship with PBM-competitor Express Scripts), WFC +0.4% (Living Will cleared by Fed)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ESRX -15.4%, SWFT -6.2%, CDNS -4.7%, ABX -3.6%, ZION -2.6%, CNI -1.6%, WHR -1%,

Companies trading lower in after hours in reaction to news: CTRV -19.5% (commences an underwritten public offering), MBII -8.6% (proposes common stock public offering), KPTI -3.8% (commences underwritten public offering of $40 mln in shares of common stock), PZRX -2.6% (modestly pulling back), SITE -2.1% (announces secondary offering of 8,500,000 shares of common stock by selling stockholders), WPZ -1.7% (reduces quarterly distribution to $0.60/share from $0.85/share)

FT : French supermarket Casino gets hit with second junk rating

French supermarket Casino gets hit with second junk rating


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French supermarket operator Casino Guichard-Perrachon suffered the infamy of being hit with its second junk rating in a little over a year on Monday after Fitch Ratings became the latest to strip the company of its investment grade status.

Fitch cut its rating on Casino by a notch from BBB- to BB+, citing challenging conditions in the company’s French home market and the group’s high debt levels for the move. It kept its outlook on ‘stable’.

The downgrade reflects the weaker-than-expected profit growth in Casino’s core French market in 2016 relative to Fitch’s expectations.
We acknowledge Casino’s somehow lower presence in the challenged and low-margin hypermarket format relative to Carrefour, and its intention to focus efforts on the development of the higher-margin premium segments. However, EBITDA uplift is likely to be capped by weak demand and high competition. Since France represents 71% of proportionally consolidated EBITDA (2016, continuing activities), there is limited scope to improve group’s proportionally consolidated metrics.
The downgrade comes just 13 months after S&P downgraded France’s second-largest supermarket operator into speculative territory.

The comments on the difficult French market are also a timely reminder of the challenge that the winner of the French presidential election run-off will face in reviving France’s moribund economy.

Casino, which also has extensive operations in Brazil, has been under fire from Muddy Waters, the US short-seller, which last year described the company as “one of the most overvalued and misunderstood companies we have ever come across”.

WSJ : Will Emmanuel Macron Be Able to Run France If He Wins the Presidency?

Will Emmanuel Macron Be Able to Run France If He Wins the Presidency?
Political novice’s year-old party will have to secure majority of parliamentary seats in June elections for new president to implement his agenda

PARIS—Political novice Emmanuel Macron is widely expected to win the French presidency on May 7, but he will need a big victory in yet another crucial round of elections to become more than a mere figurehead.
For Mr. Macron to be able to implement his policies if he defeats far-right leader Marine Le Pen in the runoff, his upstart movement will have to secure a parliamentary majority in June.
Turning En Marche, or “On the Move,” the party that Mr. Macron founded barely a year ago, into a political machine will be a tall order for the 39 year-old former investment banker, who on Sunday won the first round of the presidential contest with 24% of the vote.

So far, Mr. Macron, who is running for office for the first time, hasn’t named anyone who would join his administration, and has announced only a handful of the candidates who will run under his colors for the 577 seats in the two-round legislative vote scheduled June 11 and 18.
Without a majority, French presidents have historically been smacked by a constitutional punishment known here as “cohabitation”—a form of power-sharing under which a prime minister from the opposition runs the government, effectively squeezing the head of state into a ceremonial role.
The presidential and legislative elections have different dynamics, warned Famke Krumbmüller, analyst at political risk consultancy OpenCitiz. She said having Mr. Macron’s stamp of approval may not be enough for En Marche candidates to unseat rivals in constituencies where voters enjoy cultivating a direct bond with their elected officials.
“The question is whether they will be able to win against rivals with local bases, even if those rivals’ parties got smashed in the presidential vote,” Ms. Krumbmüller said.

Mr. Macron is expected to win the May 7 runoff against Ms. Le Pen with 61% of the vote, according to a survey conducted by the OpinionWay polling agency during and after Sunday’s first round.
If she prevailed in the runoff, Ms. Le Pen would face a different set of obstacles. Unlike Mr. Macron, she can rely on a nationwide and disciplined apparatus, as well as on the National Front’s deep-rooted local bases. But her performance in the first round of the presidential election—she garnered 21.3% of the vote, up from 17.9% in 2012—suggests she has yet to broaden the party’s mainstream appeal.

That is necessary to succeed in the two-round voting system introduced by Charles de Gaulle upon fathering the Fifth Republic, a new constitution designed to squeeze political majorities out of France’s fractured postwar landscape.
In recent years, left and right mainstream parties have often coalesced in second-round votes to block the National Front, saying its history of xenophobia made it unfit to govern. The party currently holds only two seats out of 577 in the National Assembly, France’s lower house of parliament.

The outcome of the legislative election will provide a measure of French voters’ repulsion toward the socialist and conservative parties that have alternated to govern France in the past four decades.
On Sunday, both Benoît Hamon of the ruling Socialist Party, and François Fillon of the conservative Les Républicains, were ejected from the presidential race, garnering 6.4% and 20%, respectively.
Despite the humiliating blow, leaders of Les Républicains vowed to quickly regroup, conquer a majority in parliament, and impose a “cohabitation” on Mr. Macron.
“It’s wasn’t our ideas that were defeated on Sunday, it was our candidate,” Daniel Fasquelle, a lawmaker for Les Républicains and mayor of Le Touquet, a resort town, told French television. “Our ideas are shared by a majority across the country and we will demonstrate that in the legislative vote.”
Socialist Party officials sought to display similar fighting spirit, saying they would line up candidates in all the constituencies against Mr. Macron’s recruits. Michel Rombaut, a volunteer in Mr. Hamon’s campaign and a Socialist for nearly 40 years, said Mr. Macron’s candidates should expect fierce resistance.
“There are elected officials who have been in place for years and who have done a fantastic job,” he said. “Many are big local personalities and it will be very difficult to dethrone them.”
Even if she lost to Mr. Macron, supporters of Ms. Le Pen expressed hope she would have a strong shot at becoming the leading face of the opposition by feeding off the leadership disarray besetting the Socialists and Les Républicains.
“It’s incredible, but the two parties that have dominated the Fifth Republic are out,” said Philippe Murer, an adviser to Ms. Le Pen.
On Monday, Mr. Fillon stepped back from the coming legislative battle, telling troops at Les Républicains that he no longer had the “legitimacy” to fight with them.
During the campaign, Mr. Macron has said he was confident in his capacity to build a parliamentary majority. He has been looking to recruit candidates from outside the political arena and pledged to enforce strict gender parity when naming them.
Speaking to supporters on Sunday evening, he set to work, spreading his arm wide open and saying: “Every woman and man is welcome. I won’t ask those who join me where they come from.”

WSJ : How a Macron Presidency Could Bring About ECB Tapering

How a Macron Presidency Could Bring About ECB
A win for centrist Macron in election runoff may move the ECB closer to tapering its stimulus program

An ascension of Emmanuel Macron to France’s presidency could trigger a much-anticipated event in European financial markets: the scaling back of the European Central Bank’s vast stimulus program.

ECB policy makers have been wary of signaling an end to their monetary stimulus amid the risk posed by the rise of euroskepticism. That is despite evidence of a strong economic rebound in the 19-nation eurozone.

ECB rate setters will gather in Frankfurt on Wednesday and Thursday for their next policy meeting. They are widely expected to leave their policy mix unchanged.

But Mr. Macron’s first-place finish on Sunday, ahead of anti-euro candidate Marine Le Pen, places him in pole position for May’s second round and puts a reduction of monetary stimulus back on the agenda, investors say.

Any such move by the ECB would have a big effect on markets, driving money out of bonds and, if investors stay confident about the local economy, moving more cash into riskier assets. On Monday, European stocks rallied, and German and other safe-haven government bonds sold off.

“The focus will now shift to the improving eurozone economy and the prospect of the European Central Bank beginning to withdraw monetary policy stimulus,” said Anthony Doyle, fixed-interest investment director at M&G Investments. “European government bond yields will likely come under pressure in the months ahead.”
When the Federal Reserve signaled in mid-2013 that it might start scaling back its bond-purchase program, known as quantitative easing, or QE, market volatility spiked and bond yields jumped more than a percentage point in an episode known as the “taper tantrum.”

Away from the political sphere, the outlook for the eurozone has been brightening for months. Eurozone business surveys published by Markit on Friday indicated activity is at its strongest level in six years. The region’s unemployment rate, at 9.5%, is the lowest since May 2009 and consumer prices rose 1.5% in March from a year earlier, a rate not far away from the central bank’s target of close to, but below, 2%.
The big question is: When will officials start reacting to this data?


While the central bank has moved to curb its stimulus in recent months by slowing its bond purchases and phasing out a series of free loans, some top officials have denied that those changes mark a turning point.
“It’s not signaling a change in monetary policy stance, it’s simply reflecting a different assessment of real conditions,” Belgian central-bank governor Jan Smets said in an interview.
ECB rate setters will meet again in Frankfurt on June 8. While few investors expect significant policy moves to happen then, many believe that officials will start preparing markets for tighter money in the future. They may drop a pledge to increase the bank’s stimulus efforts again if the outlook darkens. That so-called easing bias “could well be discontinued in light of all the positive news that is coming in,” said Dutch central-bank governor Klaas Knot.
Investors are also zeroing in on increasing discrepancies between the views of officials from Northern and Southern Europe. The former have appeared more eager to unpeg the central bank’s benchmark interest rate from its currentrecord-low level of minus 0.4%.

Mr. Macron’s victory will “increase the possibility of tapering,” said Nadège Dufossé, head of asset allocation at French firm Candriam Investors Group.
But unlike in the U.S., where stocks came under pressure during the taper tantrum, the ECB’s shift might come a time when investors are increasingly willing to take risks.
On Monday, the Stoxx Europe 600 index gained 2.1% and eurozone bank stocks jumped almost 7%, not least as investors imagined the benefits of higher interest rates to their profits. Meanwhile, the spread between 10-year yields in French and German government bonds—a sign of how much riskier investors deem French debt to be—have almost halved from their February levels, the widest since 2012.
Indeed, the political risks that have sandbagged European markets over the past year may be starting to dissipate. While eurozone stocks continue to trade at a discount to those in the U.S., money has cautiously started to return to the region’s equity funds, according to data provider EPFR Global.
“If anything we could be towing back from populism,” Mark Dowding, portfolio manager at London-based BlueBay Asset Management, who bet against French government bonds earlier in the year and has been cashing in on some of that investment.
Last month, fears that Geert Wilders ’ euroskeptic Party for Freedom might emerge victorious in Dutch national elections also proved unfounded. In Germany, support for the euroskeptic Alternative for Germany party ahead of the Sept. 24 election is now below 10%, while Chancellor Angela Merkel’s Christian Democratic Union and her main rival, Martin Schulz’s Social Democrats, are both polling above 30%.
A policy reversal from the ECB may actually help mainstream parties, as it would relieve pressure on the nation’s conservative savers.
“It would definitely make Merkel happy”, said Paresh Upadhyaya, a portfolio manager at Pioneer Investments.
Over the last two months, markets have only timidly started positioning for tighter ECB policy. Derivatives that protect investors against moves in short-term interest rates have shown a consistent trend toward signaling that future rates might be slightly higher.
To be sure, top officials continue to urge caution in their last public comments before this week’s policy meeting. ECB chief Mario Draghi warned in Washington on Friday that underlying inflation in the eurozone was too weak and the bloc’s economy still needed “very substantial” support from Frankfurt. His top officials struck a similar tone last week.
“Inflation is just not there outside of energy,” said Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research. “I think that expectations of ECB tapering are a little bit premature.”