¿Crecerá europa? DB responde en 140 palabras

¿Qué podemos esperar del mercado esta semana? 140 para tratar las cuatro áreas clave para tus finanzas y la economía global más un «Y si…»

 

Macro
European growth – One reason investors were pushing wildly on their sell buttons this week is a fear Europe is stuck on its back. Consider the following: of the 3.5 per cent increase in output achieved since the trough five years ago, the only positive contributor to growth has been net exports. Cumulatively the other components of output remain at 2009 levels. Private consumption is flat and a tiny increase in government spending is negated by a similar drop in investment. So can Europe’s strong trade story continue? Above all export performance relies on the health of the export markets. Two-thirds of the €200bn improvement in the region’s annual goods trade balance between 2008 and 2013 came from emerging markets. Asia ex-Japan alone accounted for 40 per cent of the rise. Everyone is watching Mario Draghi. They should be observing further afield.

Strategy
Market pain – Predictable things happen when up years turn into down years. Most global equity markets have long been in the red for 2014, but after the mayhem this week bourses in US, Spain, Hong Kong and Australia are also hovering around negative territory having been up for most of the year. First there is the shock that so many business models and investment strategies are revealed to be simply beta plays. High cost-income ratio asset and wealth managers become unprofitable. So-called absolute return funds lose money despite the clever bells and whistles because they are mostly invested in equities. Genius traders who moaned about gently rising markets are smacked by volatile falling ones. Thank goodness therefore that bond investors have watched prices soar again in 2014. But imagine their incomprehension when two decades of fixed income up years eventually turn down.

Stocks
Netflix – Last month a large number of contrarian readers chose basket-case Sony over glamour-boy Netflix in our inaugural stock picking competition. They, together with the French television industry are some of the few cheering yesterday’s profit warning that sent Netflix’s shares down by a fifth. Game over? Few remember that only five years ago the Netflix business model was considered kaput. Now everyone from Amazon to HBO believes in subscription streaming. Yes, a recent price hike has dented Netflix’s subscriber growth. But do not forget that back in late 2011 the company said its decision to raise prices had caused US subscriber numbers to fall – for the first time ever. Within three months its shares fell 80 per cent. Then (when Netflix had the same 90 times forward price/earnings ratio as it does today) they rallied 700 per cent.

Finance
Banks sell-off – What happened? Investors were supposedly in love with American banks. Shares had doubled in two years and there was optimism that a firmer US economy would lead to rate rises and higher net interest margins. A few days of turmoil has dashed these hopes for a NIM recovery – shares in JPMorgan for example are down a tenth in ten days. An over-reaction? The reality is that despite all the funky things the likes of JPMorgan, Citigroup, Wells Fargo and Bank of America do these days, old fashioned net interest income still accounts for half of aggregate pre-provision revenues. Their average NIM remains a quarter down on five years ago but actual interest incomes had started to trend higher. With three quarters of large bank balance sheets dependent on 5-year rates or less it is no wonder investors are cooling fast.

Digestif
French Nobel – Prime Minister Valls described Jean Tirole’s memorial prize in economics – the first Frenchman in a quarter century – as a «thumb in the eye to French-bashing». Of course national pride in accidents of birth is delusional. However in this case Professor Tirole’s life in France surely inspired his work on market power. EDF only gave up its monopoly of electricity generation under a European directive in 1999. Ditto for France Telecom. Should students of regulated industries want a live case study, on Tuesday 97 per cent of France’s pharmacies (average annual salary of a chemist: €100,000) stayed shut protesting government plans to introduce competition. Indeed 37 trades and professions from locksmiths to taxi drivers (good luck Uber) remain protected. How ironic if Professor Tirole had won last month and couldn’t fly strike affected Air France to Sweden to collect his prize.