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After several months of slowing down, GDP in the United States and in Europe surged ahead of expectations. Uncertainties about the sustainability of this improvement are however numerous. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’.

After several months of slowing down, global economic growth is starting to show signs of stabilising. In the United States, GDP surged ahead of expectations in the first quarter, increasing at an annualised rate of 3.2% compared to the last three months of 2018. “However, this good surprise was largely due to an increase in public spending, the accumulation of inventories and a decrease in imports, whereas consumer spending and corporate investments made only a slight contribution”, indicates Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI - Banque de Luxembourg Investments. “In the eurozone, GDP also provided a positive surprise in the first quarter, with the pace of growth picking up to 0.4% quarter-on-quarter, compared to 0.2% between October and December of last year. Continuing weakness in the manufacturing sector was partially offset by the resilience of domestic consumption. Uncertainties about the sustainability of this improvement are however numerous.”

Central banks: interest rates remain unchanged

As expected, the Federal Open Market Committee left interest rates unchanged at its 30 April/1 May meeting. Having switched from a hawkish stance in 2018 to a more dovish approach at its previous meeting, the chairman Jerome Powell issued a rather neutral statement this time, declaring that he was satisfied with the level of economic growth, inflation and interest rates. In Europe, the European Central Bank offered nothing new following its April meeting. “ECB is maintaining its ultra-accommodative approach to monetary policy and will give details about the conditions for the targeted longer-term refinancing operations in June.”

Bond markets are stable, government bonds remain unappealing

The bond markets were extremely stable in April. In the eurozone, the 10-year government bond yield only changed slightly in Germany, in Italy, and in Spain. “Government bonds remain a rather unappealing asset class”, underlines the Luxembourgish economist.

Equity markets continue to post gains

After their strong rally in the first quarter, equity markets continued to post gains in April. The MSCI All Country World Index Net Total Return expressed in euros was up 3.6%, taking its performance since the beginning of the year to 18.3%. Over the past month, the S&P 500 in the United States, the Stoxx 600 in Europe, the Topix in Japan and the MSCI Emerging Markets went up. “In terms of sectors, technology was the front runner since beginning of the year, ahead of consumer discretionary and industry, while healthcare and utilities generated less favourable performance. By region, the United States and China headed the field, while Japan slightly lagged behind”, concludes Guy Wagner.


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