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Going overweight in Japan
- Monday, June 13 - 2005 at 22:06
We decided to reverse the overweight in European equities and to increase the overweight for Japanese equities by the same amount. There was also a change in the outlook for the euro/dollar and the pound/euro 3-month rate targets. The 12-month target for the Eurozone short-term interest rate was revised downward, as were most bond yields.
Economics
We expect US industrial production to have picked up in May, while the Beige book and most sentiment indicators are expected to have improved.
Underlying inflation likely continued to grow in May. Eurozone industrial production should have recovered in April. Headline inflation for the area is likely to have slowed in May to below the ECB's 2%-threshold.
Foreign exchange
We still view any upward movement in the euro/dollar rate as a correction within the downtrend. After last week's decline, the dollar may again rise against the yen, back to 108.00.
Fixed Income
The relentless rally (or pain trade) goes on and on. Fed chairman Greenspan's speech before Congress this week confirms the Fed is still on course for higher rates.
We have updated our forecasts for Eurozone interest rates, most bond yields and exchange rates (mainly lower euro in the coming three months).
Equities
The prospect of nice economic growth in the US and mild inflation can't be considered as bad for the equity markets.
In combination with the bullish figures and guidance of Texas Instruments and Intel, it made the logical reversal after the rally of previous weeks very mild.
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Internaxx
Monday, June 13 - 2005 at 22:06 UAE local time (GMT+4)
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This article was updated on Sat May 26 2007.
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