Good morning,

Markets opened flat in Europe after we got contrasting data out of the US and China. In the US, the economy continued to grow at a strong pace in the second quarter of 2014. This fuelled speculation that interest rates will rise at a faster rate than expected in the US and led to a further strengthening of the US Dollar. Gross domestic product in the US expanded last quarter at the fastest pace since 2011, compared with little or no growth in the euro zone and Japan, where central banks are maintaining or expanding monetary stimulus. The Federal Reserve is going in the opposite direction, preparing to raise interest rates next year, a decision that would make dollar-denominated debt even more attractive to yield-starved international investors.

On the other hand we have the Hang Seng index which is down 2% due to two main reasons. The first being that China reported that profits of industrial companies declined last month for the first time in two years as a slowdown in the world’s second-largest economy deepens. The second is the pro-democracy protests in Hong Kong.

In Europe, Mario Draghi’s strategy for reviving the euro area looks like devaluation. While the European Central Bank president says the exchange rate isn’t a policy target, officials aren’t secretive about their approval of the currency’s 9% slide. The depreciation increases the cost of imports and boosts exporters’ competitiveness, aiding the effort to revive inflation that data tomorrow will probably show is at the weakest since 2009. Nomura predicts the shared currency will fall to $1.20 by mid-2015 as the European Central Bank signals further monetary stimulus that tends to weaken the currency, while the Federal Reserve stays on course to end bond purchases next month. The euro dropped more than 7% this quarter to $1.2684.

In corporate news, UBS AG, Switzerland’s largest bank, indicated profit for July and August already exceed analyst estimates for the full third quarter. The update was published as part of the offer the bank is making to investors to exchange their shares for those in UBS Group AG, a holding company created to meet regulator demands for separate legal entities in different regions. Swiss regulators are seeking to shield the country from future financial crises after a bailout of UBS in 2008.

Allianz shares fell more than 6% on Friday after Bill Gross, in charge of $2 trillion as chief investment officer at Pacific Investment Management Co., had just announced that he was joining Janus Capital Group Inc., a struggling stock fund manager. Pimco over the weekend started to contact investors, saying there will be no major changes in investment strategy at the manager of the world’s biggest bond fund.

Air France-KLM Group will seek to resume a full flight schedule this week and continue to pursue an agreement with its pilots, the majority of whom yesterday ended a strike that grounded about half the airline’s weekend service.

Commerzbank AG, the German lender seeking to resolve a probe into Iran sanctions violations, also faces a U.S. inquiry into whether it broke anti-money-laundering laws. Federal prosecutors in Manhattan are conducting the money-laundering investigation separately from the sanctions case, which has been nearing a settlement. The newer probe looks at whether the firm failed to meet obligations for detecting and preventing money laundering.

Good day and happy trading!

Kristian Camenzuli