Reduce corporate bond allocations

Economics

This week we expect US Q1 GDP growth to slow due to lower private consumption. Core durable goods orders should pick up in March. Business sentiment (Chicago PMI) probably saw some pullback in April while consumer confidence (University of Michigan) remained stable.

This week we expect the French business (INSEE) sentiment indicators to remain stable in April. We expect unemployment trends to have stabilised in Germany and France in March and industrial
production and household spending to improve in Japan in March.

Foreign exchange

Euro/Dollar: Unless we see a break above 1.3125, the outlook would be lower with 1.2985 resp. 1.2800 as next support levels. Latter level is an important long term support level.

Dollar/Yen: The decline below 106.65 negated the immediate bullish view. Instead, the dollar is now vulnerable to a further decline back to the 105.75/25 support zone from where we would expect
a rebound.

Fixed Income

(Un)welcome back, "conundrum"...Only two months after Chairman Greenspan's warning on unrealistically low long-term real interest rates in the US but also elsewhere in the world, we are back to the same levels.

Arguable: the global growth momentum is weaker than before, but is still much above any level that would justify low real interest rates for the next 10 years. We are revisiting the case for being short duration in European bonds.

Equities

After the weakness of previous weeks, stock markets managed to stabilise. Economic news was still mixed, but the overall picture of the US first quarter results considerably improved.

Together with stock markets valuation, that has become even more attractive, this might help markets to restore at least a part of the damage indices suffered.