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Global financial market in 2017

Global financial market in 2017

The most memorable events of 2016 were the shocking results of the referendum in the UK, where 51.9% of voters voted in favor of the country's exit from the European Union, as well as the unexpected victory in the us presidential election of Donald trump. Observers note that in the Wake of these events in the global political system began to occur tremendous changes, and this is certainly reflected in Finance. 

The decision to withdraw the UK from the EU was followed by a change of government in the UK. The once strong British currency, which updated the 30-year minimum for the first time following the referendum, suffered greatly. And at the same time in 2017, the UK and the EU have yet to agree on the terms of the "divorce". The new British Prime Minister Theresa may said that her country intends to activate article 50 of the Lisbon Treaty on withdrawal from the EU before the end of March 2017. And, if the new British government will be able to start the negotiation process in the stated time, in October 2018, the parties will be able to come to an agreement. Depending on the terms of the" divorce " will be to a greater extent the British market and the British currency, but some of the risks are already taken into account in the quotes and exchange rates. 

The main concern is that Brexit may hit the financial sector of the UK and lead to the loss of the status of London, still considered the world financial center. At the end of the year, the situation developed so that large British banks appealed to the Ministry of Finance of the country with a request to maintain the ability to work under EU laws for 5 years after leaving the EU to adapt business to Brexit conditions. We assume that echoes of the thundering Brexit theme will sound in 2017, but their impact on the markets, in particular, on the European market is unlikely to be significant, since the European market has developed sufficient immunity to this topic. 

Donald trump's victory in the us presidential election also caught the participants of the world financial markets by surprise, while they expected the victory of the candidate from the political environment, Hillary Clinton. As a result, the exchange traders revised their risks in connection with trump's election promises to conduct a protectionist policy, and due to the strengthening of inflation expectations in the markets, a massive flow of capital into US stocks began. The us dollar index, reflecting the ratio of the us currency to the basket of six major world currencies, after trump's victory, stepped 100 p. up and by the end of the year exceeded 103 p.  

On the background of low inflationary expectations in the US, players have begun to predict a more dynamic increase in interest rates of the Federal reserve in 2017. Meanwhile, in December, the us Federal reserve held a meeting, following which it became clear that in 2017, not two, but even three rate increases are possible. It is likely that in 2017, the us dollar may remain a favorite among currencies, that is, it is too early to talk about the end of the upward trend of the us greenback. On the other hand, market participants have already noted that currencies and shares of developing countries after the sales cycle began to look relatively cheap and therefore attractive. 

At the same time, trump's victory and Brexit exposed Europe's political problems and economic difficulties. In December, a constitutional referendum was held in Italy, which is considered the main threat to the financial stability of the Eurozone because of the huge debt. The results were a failure, as they questioned the government's ability to reform and reduce public debt. In addition, investors began to seriously fear that the period of political instability that will follow the resignation of the Italian government, may cripple several troubled Italian banks and pull as a result of the entire financial Europe. The European Central Bank is noticeably puzzled by the existing problems and has already announced the prolongation of the quantitative easing program until December 2017. 


Meanwhile, in 2017 in Europe there may be new political turmoil due to the unpredictable results of the elections in France and Germany. Thus, the situation in Europe, both financial and political, does not seem stable to us. We expect that in 2017 investors will most likely not make curtsies in favor of the single European currency. Next year, especially in the first half, the Euro is likely to continue its movement towards parity with the us dollar. 

Donald trump's victory in the elections led to unexpected consequences for the Russian market. While capital was selectively withdrawn from many emerging markets, EPFR data relentlessly recorded the high demand of Western investors for shares of Russian companies after the results of the presidential elections in the United States. It is believed that the Russian market can benefit from trump's presidency against the background of the fact that the tension in us-Russian relations can come to naught. We do not believe that the Russian issue has been fully played out. In the context of easing the pressure of geopolitical risks and the oil factor in 2017, the financial world is likely to continue to bet on Russia. 

At the end of November 2016 in Vienna, OPEC member countries, overcoming political differences, achieved the signing of an agreement on limiting oil production in order to bring to a balance of supply and demand in the oil market. Later, non-OPEC countries joined the agreement. Agreements to limit production, according to our estimates, can keep Brent oil prices from slipping below $50/bbl for a long time. For the ruble, this is a very positive moment, as the ruble still continues to be tied, albeit weakening, to oil prices. In the Russian stock market in 2017, meanwhile, we see the idea in the shares of the banking and consumer sectors. 

In addition, the next year is expected to revive consumer demand and lending, in 2016, the maximum growth was shown by the indices of shares of transport companies, electric power companies and the metallurgical industry. At the same time, the shares of banks and consumer sector companies remained outsiders, and in 2017, in our opinion, in the Wake of growth, the market can evaluate outsiders.