If last week the increases were due to the publication by the pharmaceutical companies Pfizer & BioNTech of the progress in the development of their vaccine, with the European markets especially supported by their strong exposure to the most cyclical sectors, while, in the US ., the Nasdaq fell 2% after portfolio rotation away from tech stocks. In Spain, the Ibex posted its biggest rise in more than 10 years on Monday and gained + 13% on the week, driven by the values exposed to the tourism, financial and real estate sectors.
But this week the “party” continues, with Spanish banks in “euphoria” mode (be careful), after BBVA’s sale of its division in the United States, which triggers the purchase of Banco Sabadell, an operation that JPMorgan is already studying. BBVA rose 20% on Monday, Sabadell 15% and Santander 6%.
At the macroeconomic level, we learned about the first leading indicators for the month of November: in the United States the consumer confidence survey of the University of Michigan disappointed, contracting in all its components despite the increase in expected inflation, while in the Eurozone we learned about the Sentix investor confidence index, improving consensus estimates despite registering its second consecutive monthly decline after the strong rebound between April and September and the ZEW survey expectations, which fell to the lowest since April in the euro zone while in Germany it registered stability in the current situation component and the drop in expectations.
Regarding the evolution of the pandemic, the new diagnosed cases of Covid-19 continue to rebound in the US, with hospitalizations reaching new records, while in Europe they would be moderating after the imposition of the latest social distancing measures, but in both cases with the mortality growing.
In this sense, the possible change of government in the US would adopt a more conservative stance in containing the pandemic, prioritizing the adoption of restrictive measures, which it denied on Monday, according to a study by its experts.
Given that the new American government will be, in all probability weak, with a divided Congress and Senate and without clear majorities and where Trump’s protectionist legacy will not disappear overnight. Aware of this, the European Commission announced that it will activate tariffs on US exports (a 25% tariff on products such as sugar cane, spirits, tractors, video games …) to Community territory worth 3,400 million euros as response to restrictions imposed by the Trump administration in 2019 for alleged illegal aid to Airbus by the European Union. At this point, the European Commission has also expressed its willingness to withdraw its tariffs as long as the future administration withdraws its tariffs, in an attempt to channel trade relations with the United States and avoid an escalation in the trade conflict.
Regarding our view of the market, after the strong rise this week and the rotation of investors towards the more cyclical sectors, we do not rule out some profit taking, a movement consistent with our idea that the effectiveness of the Pfizer vaccine gives visibility recovery (there is light at the end of the tunnel) but said recovery will be slow and unstable, which justifies both looking for values that can benefit from the arrival of the vaccine and maintaining other titles growth/ defensive players that still have potential, so the stock picking takes on a fundamental importance. Of course, we are still aware of other risks in the political field after the American elections (who will be the winner? How long will the litigation last? How will the distribution of power remain?), So we maintain a position of Prudence considering valuations continue at demanding levels, especially in the US.