Still cautious on equities

Economics

This week in the US we expect consumer confidence and the Chicago purchasing manager index to decline on higher oil price concerns. US GDP in Q3 probably strengthened, supported by strong consumer spending.

European business indicators are set to have stabilised with an uptick likely in the October flash estimate for Eurozone inflation. In Japan improved industrial production and household spending for September should show a more balanced economy.

Foreign exchange

Euro/dollar: the euro broke out on the upper side of its consolidation range and is now heading higher towards the 1.2800/1.2900 area.

Dollar/yen: the decline out of the June-October consolidation triangle points the outlook lower with 107.00 resp 105.00 as next downside
objectives.

Fixed income

As largely expected, yields were quite stable over the week. They are not expected to witness a major trend in the coming days, while technical analysis points to the risk of further moderate
downside.

Moody's upgraded the long term rating of Deutsche Telekom to Baa1 from Baa2. Hungary's central bank lowered its benchmark interest rate. Brazil's central bank raised its benchmark lending rate for the second time in two months.

Equities

After having three reversal days in a row, caused by mixed results and volatile oil prices, markets traded sideways towards the end of the week.

The Nasdaq managed to outperform the other US indices thanks to a boost in internet related stocks like eBay. Up to now, the earnings season seems to be rather mixed.

We stick to our cautious view on the equity markets and think that the ongoing underperformance of formerly-called-defensive sectors like consumer staples and health care increases the attractiveness of other defensive plays like energy and telecom.