BNP Paribas Asset Management

We are more than a quarter of the way into the year which has promised much in the way of excitement and drama ‑ and delivered very little. For most investors, that is good news, even as it is not such good news for those looking to profit from volatility.

Following weaker-than-expected US data in the first quarter and broadly lower sovereign yields, fixed income investors have been fixated on two near-term themes: Firstly, how the FOMC will react to the recent data; and secondly, what foreign exchange reserve managers will do with their money. Not surprisingly, each theme will materially impact the other.

When it comes to renewable energy, many investors are being put off by three myths that could lead them to miss out on the opportunities presented by a revolution in energy generation. That’s the view in a recent paper from David Richardson of Impax Asset Management, BNPP IP’s environmental market specialist partner.

Since the end of the Bretton Woods exchange rate regime in 1973, the US dollar has undergone protracted periods of appreciation and depreciation on foreign exchange markets. Such periods have been associated with a wide dispersion in the returns of various asset classes at both global and national levels with performance depending on the particular factors driving the dollar’s valuation on exchange rate markets.

Will the recent decline in inflation impact the path of US monetary policy rates in the near term? Inflation has received increased focus this year as the US Federal Reserve (Fed) prepares for “lift-off”, with one leg of their dual mandate below target. Inflation data has drifted lower, potentially impacting long-term price stability. This has occurred despite persistent strength in labor markets leading some to speculate that global deflationary forces have migrated to US soil.

In assessing how attractive local currency emerging market sovereign debt is currently, we look at four criteria: changes in commodity prices, leeway on monetary and fiscal policy, valuations and external debt vulnerability. Asian countries appear the least sensitive to falling commodity prices. With the exception of India, Asia has the most leeway on fiscal policy. In terms of monetary policy Emerging Europe has the biggest margin of manoeuvre.

Relative rather than absolute returns, prudential regulation of banks and investors requirements – three reasons why matters may not be quite as simple as they seem. Global asset management accounted for assets of almost USD 64 trillion in 2013 or 25% of world financial assets. This is expected to climb to nearly $100,000 billion by 2020 on the basis of the current economic and demographic outlook.

 ECB voorzitter Mario Draghi bracht de markten vorige week in beroering met zijn belofte dat hij al het mogelijke zou doen om de euro veilig te stellen. Zijn uitspraak stuurde de Spaanse en Italiaanse obligatierente lager en was een oppepper voor de aandelenmarkten.

De stijgende obligatierente in Spanje en de grote kans dat Griekenland zijn begrotingsdoelstellingen andermaal niet kan nakomen, haalden de aandelenmarkten onderuit. Duitse obligaties verloren wat van hun glans nadat kredietbeoordelaar Moody’s een eventuele ratingverlaging voor Duitsland, Nederland en Luxemburg in het vooruitzicht stelde. Toen de weer opflakkerde, daalde de Amerikaanse obligatierente dankzij de vlucht naar veilige havens naar diepterecords.

De afgelopen week tekende zich een mogelijke verlegging af in de aandacht voor de begrotings- en groeiproblemen in Europa: de markten richtten zich op het laatste nieuws van de Amerikaanse Fed. Fed-voorzitter Ben Bernanke sloeg in zijn halfjaarlijkse toespraak voor de Amerikaanse Senaat een voorzichtige toon aan. Door zijn aarzeling over de noodzaak van verdere stimuleringen en zijn terughoudendheid over de groei bleef de obligatierente in de buurt van het laagste niveau ooit en wankelde de aandelenmarkt even. Het zien wij op dit moment als voor de aandelenmarkten in grote lijnen neutraal.