Investment Officer Luxembourg

The eurozone looks increasingly weak. The euro slipped to parity with the dollar last week and a peripheral debt crisis threatens if interest rates rise sharply. With Italian Prime Minister Mario Draghi’s departure announced on Thursday, the stability of the euro is anything but certain.

Negative surprises put a cap on the upside potential, especially for equities. As a rule, investors react strongly to surprises, often shaped as economic data. After all, the consensus expectation should already be incorporated in the prices. 

It is therefore no coincidence that there are indices that mathematically determine the degree of surprises. A good example are the Citi Economic Surprise indices. 

The fact that agricultural commodity prices have risen very sharply in recent months does not mean that investors should expect an equally harsh decline. The precarious balance in the global chain keeps prices high. This offers opportunities for investors.

Eurogroup finance ministers on Monday again failed to agree on naming the successor for Klaus Regling as chief of the European Stability Mechanism even after Italy withdrew the candidacy of European Commission official Marco Buti.

Neither the Luxembourg nor Portuguese candidate managed to win the required 80 percent majority in the vote that followed Italy’s withdrawal. Eurogroup president Paschal Donohoe said that the next vote now will take place in September. Regling is set to retire in October.

Goldman Sachs Asset Management, which officially took ownership of NN Investment Partners at the beginning of this year, on Wednesday announced a number of changes at the top of the Dutch-based asset manager. Valentijn van Nieuwenhuijzen, NN IP’s current chief investment officer, has been appointed global head of sustainability for public investing.

Problems with energy supplies, a perfect storm of geopolitical uncertainty and, in the autumn, probably another Covid flare-up… Investors in European equities are not having it easy, and yet not everything is doom and gloom.

At first glance, there is little reason to be optimistic about Europe and European equities by extension. The enormously weak euro bears witness to the malaise on the Old Continent. Optimists will argue that exporters will benefit, but then the energy supply must be secured, and it is not.

Rising interest rates and growing balance sheets have led to a rise of 20.1 percent in interest income for Luxembourg’s banks in the first quarter, according to data released by financial supervisor CSSF. The improvements however were not enough to counter a decline in non-recurring revenues, which meant overall bank sector profits fell 2.4 percent.