Brief: Wall Street strategists are cutting their forecasts on European equities on concern that the war in Ukraine will hurt economic growth, while investors pull money from the region’s stock market at the fastest pace in three months. Bank of America Corp. and Goldman Sachs Group Inc. both lowered their index targets, with the latter now expecting virtually no full-year returns for Europe’s Stoxx 600 in 2022. Credit Suisse Group AG reduced its overweight, while EPFR Global data showed $1.8b outflows from the regional equity funds.The conflict has exacerbated an energy crunch in Europe, which is heavily reliant on Russian imports, just as central banks prepare to tighten policy to tackle already-high price pressures. Europe is also expected to be hit harder than the U.S., due to its closer economic ties and geographical proximity to the conflict. “Higher energy prices will likely push up inflation further and any tightness or disruption to the supply of energy, especially gas, in Europe would also have implications for production and GDP,” Goldman strategists led by Sharon Bell wrote in a note to clients.
Brief: Q4 was another solid quarter for hedge funds, with most strategies and all AUA categories delivering positive results, according to the Citco 2021 Q4 Hedge Fund Update. Overall weighted average returns for hedge funds were 1.52 per cent. The quarter once again largely continued a trend for funds on the Citco platform with net positive inflows for the months intra-quarter, and the quarter-end trading cycle experiencing some net outflows. In aggregate, investors added a net total of USD5.7 billion over the whole three-month period. In terms of flows into and out of strategies, Private Capital Hybrid saw impressive net capital of USD11.4 billion, while Multi Strategy and Equities saw meaningful outflows of USD2.7 billion and USD3.1 billion respectively. A year of record-breaking activity in Treasury continued into the final quarter, with total volumes breaking through the 100,000 mark after 39,790 payments in December. The grand total for Q4 came in at 102,549, 47 per cent higher than Q4 2020’s 69,905 payments.
Brief: January was a "negative month" for the European fund industry, as estimated net outflows from mutual funds and ETFs topped €12 billion during the month, according to new figures.The latest data from Refinitiv Lipper showed that overall fund flows amounted to net ouflows of €12.4 billion in January. Of the asset types, equity funds were the best-selling, recording net inflows of €38.6 billion in the same month.Detlef Glow, head of EMEA research at Refinitiv Lipper, said: “Despite the deteriorating situation with regard to the Covid-19 pandemic and the sluggish market environment, it was not surprising that January 2022 was, in general, a negative month for the European fund industry.” Promoters of mutual funds “faced outflows” of €38 billion, while promoters of ETFs saw inflows of €25.6 billion, he added.Glow said: “Within this market environment and given the economic uncertainties, it is somewhat surprising that European investors sold money market products, which are normally considered as safe haven investments. As a result, the overall fund flow numbers are heavily impacted by the high outflows from money market products (-€56.3 bn).
Brief: We are all hoping that the pandemic is almost over and the global economy is now on a path back to normal. However, what constitutes the ‘new normal' is uncertain and inevitably such uncertainty creates market volatility. Investors have to figure out where this path is leading them. As tepid as the post-Global Financial Crisis recovery was, the post-lockdown recovery has so far been very fast. Post-2008 high inflation was not an issue but in this cycle it has been higher and stickier. Moreover, demographics, deglobalisation and decarbonisation all suggest that the post-1980 disinflation is a thing of the past and that inflation will settle higher and retain upside risks.This is important because inflation pressures and central bank reaction functions will most likely define the tenor of this business cycle. If higher inflation is the new normal, then central banks are right to implement faster rate hikes.For equity investors this dilemma has so far played out as a rotation from growth to value. Strong economic growth and high inflation suggest upward sloping yield curves. Within equities, this is perfect territory for banks and commodity stocks. The prospect of higher discount rates also suggests the sell-off in technology stocks may have another leg to run.
Brief: Earnings last year jumped to 7.3 billion euros ($8.3 billion), the Paris-based insurer said Thursday in a statement, beating the average estimate in a Bloomberg survey of analysts. The figure was more than double earnings posted for 2020, when the firm booked a 1.5 billion-euro charge due to the pandemic. “Regarding Axa’s fundamentals, we are extremely confident,” Chief Financial Officer Alban de Mailly Nesle said in a call with reporters. “This is what we showed in 2021, and we start the year with confidence. Axa is emerging from a difficult period for insurers, which were hit by simultaneous claims across various industries when the coronavirus pandemic shut down large parts of the economy. Munich Re also reported a profit rebound for 2021, saying Wednesday that profit more than doubled, which will allow the company to return 2.5 billion euros via a share buyback and higher dividend.