US Stocks gained across the board with the S&P adding +0.9% (check Teck, Equity sector performance), boosted by a rally in financials which responded to higher bond yields. Tech stocks did not look back either and all indices got out of their Bollinger band. To temper yesterday’s enthusiasm, some analysts noted that 100% of the S&P500 gains so far this year came from Microsoft and Apple only, making the strength of the US equity market fairly narrow. With technicals remaining buoyant, investors will now shift their focus on next week’s ECB and Fed policy meetings and on the outcome of this week end G7 meeting for more cues on the trade and monetary fronts. Bonds were broadly weaker yesterday with 10y US yields climbing 3bps (to 2.97%) while European government bonds were hit harder on both core and peripherals, adding +10bps.

The Italian political situation stands out as the (only?) hurdle preventing the beginning of a normalization process in Europe. However, with last week’s 5 sigma disconnecting event between Bunds and BTP’s fading somewhat, and with many bond underweights taken out in core Europe, the odds of a further bond market correction and of the beginning of a long awaited normalization leg in core European bonds seem to be increasing.

China said it would offer to buy more US products. European leaders said they would talk one to one with D. Trump…for what it is worth as Europe seems now geared for a clash with D. Trump. 

With active management facing strong headwinds this year, UBS is said to be cutting jobs at its asset-management unit to focus on growth in China, passive and sustainable investing. At the same time, UBS CEO Sergio Ermotti said investors shouldn’t take fright after political turmoil in Italy sent tremors through global financial markets. “We are recommending clients to still be in the market”. That is what passive and “sustainable” investing is all about...

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