27th October 2017 Goodbody Asset Management

Central Banks and QE

The ECB held a monetary policy meeting yesterday, Thursday October 26^th. The latest decision was for a reduction in the pace of bond buying from €60bn monthly purchases to €30bn on a monthly basis. The ECB will continue purchasing bonds at the current pace until December of this year followed by a move to the reduced €30bn monthly pace in January 2018 and a commitment to 9 months of purchases. The ECB struck a dovish tone, stating it stood ready to extend QE beyond September 2018 or even raise the level of monthly purchases should economic conditions worsen again. In relation to interest rates, the central bank reiterated its previous language, saying they would remain at their present levels “for an extended period of time, and well past the horizon” of the purchase programme. The decisions were in line with market expectations. At the press conference yesterday, President Mario Draghi hailed the “mooted” reaction of investors despite the “importance” of the announced changes to QE.

Market Headlines

US

• U.S. stocks edged higher amid robust earnings from Twitter to United Parcel Service, speculation about the Federal Reserve’s next leader and congressional action on taxes.
• In currency news, the dollar climbed to a three-month high after the U.S. House passed a budget resolution on tax reforms and as speculation mounted a hawkish candidate may lead the Federal Reserve.

Europe

• European stocks gained rising 1.3% after ECB President Mario Draghi pledged to maintain near-zero rates for as long as necessary.
• The euro headed for its biggest weekly drop since March after the European Central Bank announced it will be buying bonds for a longer time, even as it plans to halve monthly purchases.

Asia

• Asian equities rose overnight following positive corporate results from China to Japan. Chinese equities edged slightly higher rising just 0.1% while Japanese equities advanced 1.2%.

ResMed

ResMed, the leading provider of sleep apnea devices, masks and software, reported a strong set of results after the close of the US session last night. Revenues in the quarter grew 13%, boosted by sales of masks and its software-as-a-service business. The company achieved further share gains in masks and devices as new product innovations continue to be well received by customers. Shares of ResMed, held in the Goodbody Global Leaders Fund and the Goodbody Smaller Companies Fund, have gained 27% year-to-date and rose a further 5% in after-market trading.

Microsoft

The global technology company reported better than expected quarterly results last night. Revenue of $24.5 billion increased +12% y/y while net income of $6.6 billion was up 16% y/y. Strong growth in new cloud technologies was a key driver of earnings. According to the company, 96% of Fortune 500 companies now have at least one Microsoft cloud offering, while 90% have at least two. The company, which is a holding in the Goodbody Dividend Income (GDI) suite of Funds, saw its share price rise 4% in after-hours trading on the back of the positive news flow.