Julius Baer _ Brexit, bonos gubernamentales alemanes y petróleo

Redacción - Jueves, 30 de Marzo

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ECONOMICS UK: Article 50 triggered, two-year countdown to start of Brexit Early yesterday morning, UK Prime Minister Theresa May signed the letter invoking Article 50 of the Lisbon Treaty, officially starting the clock on the two-year period before EU treaties cease to apply to the UK. A first statement from the EU read that the remaining 27 member states will “act in unity”. It could take two to three months before the EU defines its guidelines for the Brexit and elaborates a negotiation proposal, which will need to be approved by the EU27 ministers. Key European political events on the way, such as the French presidential elections and later on, possibly during negotiations, the German Bundestag elections, could delay the process but only in the (so far) very improbable case that EU-unfriendly parties gain leadership. Negotiation talks, which are hoped to begin before the end of the year, will need to progress quickly, as a deal should be reached by fall 2018 in order to leave enough time for both ratification by the EU27 and parliamentary approval in the UK. After all, the two parties will try to avoid prolonging the negotiation period into the EU parliamentary elections in May 2019 or even the next UK general elections in 2020. 

The launch of the Brexit process has little immediate market impact. Volatility may pick up, depending on how talks proceed from here and whether economic uncertainties can be kept within limits. We stick to a long-term bearish GBP outlook based on shortfalls in foreign direct investments and further economic headwinds which bear the potential to cause data disappointments ahead. 

 

David A. Meier, Economist, Julius Baer

 

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FIXED INCOME

 

German government bonds: rate expectations scaled back – we stick with bank debt 

 

“Has Le Pen become more important than Trump?”, a currency analysis questioned – or should we say bemoaned – some weeks ago when the odds of the anti-EU candidate winning the French presidential elections had seemingly more influence on the exchange rate than the US President’s health care reform. From a bond analyst’s point of view, we could also note that the European Central Bank (ECB) has become more influential on the global bond market than the US Federal Reserve. As a matter of fact, we have seen a series of Fed officials talking about the adequacy and likelihood of not less than four rate hikes in 2017, but bond yields in the US went down, not up, yesterday on comments that some ECB members might see it as premature to lift the deposit rate from its actual level of -0.4% this year. The comments came at a time incoming economic indicators point to an acceleration of growth. We still see a good chance that the ECB will narrow the spread between the repo rate of 0.0% and the deposit rate of -0.4% later this year. Therefore, we stick to our view that the German bond yields will eventually rise during the remainder of the year. 

 

Once again, there are opposing forces at work within the ECB which will keep the market volatile. We thus maintain our strategy to recommend in the EUR market only segments that have not been overly distorted by heavy ECB purchases, such as subordinated bank debt.

 

Markus Allenspach, Head Fixed Income Research, Julius Baer

 

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COMMODITIES

 

Oil – supply-glut concerns take a back seat

 

Concerns about the persisting oil market supply surplus took a back seat yesterday. Oil prices gained around 2% after the weekly official US storage data showed sizeable decreases in oil product storage, hinting at robust demand. However, US oil inventories remain at record levels and the solid product storage decreases are in fact roughly in line with seasonal trends. We do not believe that the concerns about the per-sisting supply glut are about to fade anytime soon. At least from a seasonal perspective, storage increases should continue for another month. Meanwhile, demand growth softens and shale oil output strengthens as a result of late last year’s drilling activity momentum, which remains strong to date. Support to prices also came from supply hiccups in Libya, where militias shut down a key pipeline demanding payment of salaries. However, the conflict will likely be resolved quickly and Libya remains a downside rather than an upside risk to prices. The need for petro dollars is a strong incentive to continue to incrementally ramp up exports. We stick to our bearish short-term view, and see oil prices at risk from further profit-taking. Although the futures market positioning by hedge funds has become less stretched on the long side, there are still significant bets on increasing oil prices, which bear the risks of profit-taking.

 

A bullish weekly US oil market report pushed supply concerns to the back seat and lent support to oil prices. The oil market’s supply glut is unlikely to disappear swiftly. We stick to our near-term bearish view, as prices are at risk from further profit-taking.

 

Norbert Rücker, Head Macro & Commodity Research

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