ABN AMRO : Equity markets full of cheer

Towards the end of the year, trading slows down to a trickle and there was little in the way of news to give direction. Across the world equities did well, but Europe lagged. Yields advanced, causing bond prices to fall.

The equity markets had a blast in the final normal trading week of the year, riding the wave of Trump's approved tax plans. These also boosted yields.Ralph WesselsInvestment Strategist ABN AMRO MeesPierson

The past week was the last full trading week of 2017, but trading volumes had already contracted in the wake of the options expiry on the previous Friday. In terms of news, Trump's tax reforms had the biggest impact on the markets, as US congress agreed to the revised plans and the President signed off on them. Once again, a US federal government shutdown was averted, with the new deadline being pushed back to 19 January. Elections in Catalonia saw pro-independence parties secure a fresh majority, taking 70 of 135 seats, with the Madrid government likely to put a stop to it all again. This slim majority cannot paper over the deep divisions in Catalan society, and any solution, however hard, will require mending fences. The parties concerned will need to come to the negotiating table and rebuild trust. The election outcome had some minor effect on the euro, which added one cent relative to the US dollar in the week, to 1.19.

Stock markets in the United States and Asia recorded gains of 1-2% in the week, while Europe lagged behind, at 0.5% in positive territory. The uptick in yields was perhaps the most notable feature of the week: 10-year yields added 12 and 10 basis points respectively, to 2.48% and 0.41%, thanks to the approved US tax plans and slimmer trading volumes.

AEX unchanged

The AEX index was unchanged, trailing the EuroStoxx 600, which rose by 0.7%. There was little corporate news that had much of an impact.

The Amsterdam gauge was flat at around 549. The biggest rise was recorded by Gemalto (+5.5%) on the news that it had agreed to a EUR 51 per share cash bid from Thales, which bested Atos and its bid worth EUR 46 tabled last week. ArcelorMittal (+5%) and volatile, debt-laden Altice (+4%) completed the top three, the former a beneficiary of higher commodity prices. The week's list of losers was topped by Philips (-2.5%), followed by Unilever and NN Group (both at -2%). SBM Offshore completed the financing for its landmark FPSO Liza project, while Fugro won two site investigation contracts. Meanwhile, Unilever sold its margarine and spread activities to private equity player KKR for a consideration of EUR 6.8 billion. Lastly, as reported earlier, Vopak will be facing intensified competition in the port of Rotterdam, which approved the construction of a new tanker terminal.

In the international arena, Nike posted revenue and results numbers ahead of expectations, although margins were held down by a weak US home market. FedEx notched up solid quarterly figures and upped its full-year earnings guidance. The prospect of lower corporate tax under the new Trump scheme had the likes of AT&T, Wells Fargo and Boeing promise higher wages and bonuses.

Back in the first week of 2018

With the Christmas holiday claiming the first two days of the week, the next seven days will be a brief trading week and the holidays are bound to keep trading slow.

The news agenda is pretty empty, and no investment newsletter is scheduled to come out. We'll be back in 2018, with the first week of January bringing the latest confidence indicator showings for manufacturing and services. Provisional indicators suggest confidence at sustained high levels. By the end of the week, the US will release its key labour market numbers.