Quarterly Perspectives Europe 4Q 2017

Transcription

1 Quarterly Perspectives Europe Q 7 J.P. Morgan Asset Management is pleased to present the latest edition of Quarterly Perspectives. This piece explores key themes from our Guide to the Markets, providing timely economic and investment insights. THIS QUARTER S THEMES Quantitative tightening US in late cycle 3 European equities and the euro Japan: Improving corporate governance STRATEGISTS Tilmann Galler, CFA Executive Director Global Market Strategist Vincent Juvyns Executive Director Global Market Strategist Maria Paola Toschi Executive Director Global Market Strategist Michael Bell, CFA Vice President Global Market Strategist Nandini Ramakrishnan Associate Global Market Strategist Jai Malhi Associate Market Analyst MARKET INSIGHTS Ambrose Crofton Analyst Market Analyst Guide to the Markets Europe Q 7 As of 3 September 7

2 Quantitative tightening Like watching paint dry? Ten years after the start of the financial crisis, most of the world s economies have returned to synchronised growth, near-term deflation risks are diminishing, and economic indicators suggest that this trend is likely to continue for some time. The Fed is therefore set to start reducing its balance sheet, while the European Central Bank (ECB) slows and then stops its bond purchases. The combined balance sheets of the Fed, the ECB, the Bank of England, the Bank of Japan and the Swiss National Bank have increased from USD 3.5 billion in 7 to USD 5. billion in 7. The gradual withdrawal of such a large price-insensitive buyer of bonds is likely to put upward pressure on bond yields. In the near term, this may be gradual, but it may end up being less dull for bond markets than the Fed would like, once quantitative tightening gets into full swing. OVERVIEW The time has come for central banks to tighten monetary policy and for the US Federal Reserve (the Fed) to reduce the size of its balance sheet. This quantitative tightening should lead to an increase in government bond yields, which represents a major challenge for bond investors. A dynamic approach and a widening of the fixed income investment universe will be key, as diversification and flexibility could help to navigate this period of monetary tightening. Central bank policies GTM Europe 8 Fed balance sheet: Assets USD trillions ECB balance sheet: Assets EUR trillions 5 Forecast 6 Forecast Global economy 3 Other MBS 5 3 The QE tide is gradually but surely going out. Treasuries 8 '3 '5 '7 '9 ' '3 '5 '7 '9 '3 '5 '7 '9 ' '3 '5 '7 Source: (Left) FactSet, US Federal Reserve, J.P. Morgan Asset Management. Fed balance sheet forecast is based on a monthly reduction of USD bn, starting in Oct 7 and then stepping up the monthly reduction by a further USD bn in each subsequent quarter until reaching a maximum of USD 5bn reduction per month, depending on the monthly maturity schedule of the balance sheet. (Right) ECB, Thomson Reuters Datastream, J.P. Morgan Asset Management. Balance sheet forecast does not include Targeted Longer Term Refinancing Operations (TLTRO). Forecast assumption is for the European Central Bank to keep purchases at EUR 6bn per month from Oct 7 to Dec 7 and then reduce monthly purchases to EUR bn in Jan 8, then to EUR bn in July 8 and to zero asset purchases at the end of 8. Guide to the Markets - Europe. Data as of 3 September 7. 9 Source: Guide to the Markets Europe, page 8 QUARTERLY PERSPECTIVES Q 7

3 Higher yields, steeper curves? The almost inexorable rise in bond markets, which has lasted for over three decades, has continued in recent years. This was driven by central bank quantitative easing (QE) programmes and low (even negative) interest rates, which led to the emergence of negative bond yields. At the peak of central banks action in July 6, 37% of all government bonds had a negative yield. The forthcoming contraction of central bank balance sheets represents a major challenge for bond investors from this starting point, as it seems clear that quantitative tightening will significantly increase the net supply in global government bond markets, placing upward pressure on yields. Normally, the US yield curve flattens as the Fed raises interest rates, but quantitative tightening could dampen this usual pattern and potentially even cause the yield curve to steepen, at least initially. As the ECB reduces QE, the European yield curve should steepen. Government bonds GTM Europe 67 Fixed income Global government bond net supply USD billion Net supply.5 UK Japan Eurozone. US 5-5 US yield curve %, -year yield minus Fed funds rate Recession '7 '75 '79 '83 '87 '9 '95 '99 '3 '7 ' '5 Global government bond yields % of BofA/Merrill Lynch Global Government Bond Index 8 6 Yield below % Yield below % Quantitative tightening is expected to push yields higher. -. ' '3 ' '5 '6 '7 '8e ' '5 '6 '7 Source: (Left) Copyright 7 Morgan Stanley. 7 and 8 are estimates. (Top right) Bloomberg, Thomson Reuters Datastream, US Federal Reserve, J.P. Morgan Asset Management. Light grey columns indicate recessions determined by NBER. (Bottom right) Bloomberg, BofA/Merrill Lynch, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 3 September Source: Guide to the Markets Europe, page 67 J.P. MORGAN ASSET MANAGEMENT 3

4 Does quantitative tightening create any opportunities? Quantitative tightening should lead to an increase in yields, and thus to a period during which duration performs less well than credit assets, which are better able to withstand a climate of rising interest government bond yields due to their higher coupons and/or shorter maturities. The seismic shift in monetary policy underway makes it clear that it is more necessary than ever to move away from bond benchmarks, the duration of which has only increased in recent years. There are still opportunities in fixed income markets, but, as during the latest episode of sudden yield increases in 3, investors will need to focus on fixed income asset classes that have a low correlation with long-term government bond yields and whose higher coupons can help cushion the impact of increasing government bond yields on total returns. INVESTMENT IMPLICATIONS Benchmark investing no longer makes much sense for bond investors as it forces them to own large amounts of high-duration government bonds. Investors will have to respond to this monetary tightening by broadening their investment universe to allow them to diversify into higher-yielding credit assets. The ability to dynamically vary duration and credit exposure will be key. Global fixed income: Yields and returns GTM Europe 6 Fixed income US HY EM Debt US Corporate IG Euro HY Portfolio US Treasury EU IG YTM (%) Characteristics Size (EUR bns) Correlation to: Duration -year -year (years) Bund UST 5,9. 3,5 -,, 5,6 97 7,,, 3,.3 7,5,5,5 3, 3, -, -,,5-6,,,,9 6. 6,,6,7,8.89 5,3,,3 Fixed income sector returns YTD 3Q7 : 8,8%,% 3,%,% 5,5%,7% Euro HY US IG EM Debt US HY Euro HY Euro HY Lcl: 8,8% 7,5%,8% 7,5% 5,5%,7%,8%,9%,3%,9%,8%,% US HY EM Debt US Treas. EM Debt Euro IG Infl Linked 7,% 6,%,8% 9,6%,8%,%,% 9,6%,6%,% -,%,% Euro IG US Tre as. US IG Euro HY Infl Linked Euro IG,% 5,% -,7%,% -,%,%,% 6,7% 6,5% 9,3% -,%,6% Euro Gov US HY Portfolio US IG Euro Gov Euro Gov,%,5%,% 6,% -,%,6% -,7% 5,% 6,3% 8,% -,8% -,7% Portfolio Portfolio US HY Portfolio Portfolio Portfolio -,% 7,3% -,6% 6,3% 3,%,% -3,9% 3,%,6%,7% -3,% -,% Infl Linked Euro Gov Euro Gov Euro IG EM Debt EM Debt -3,9% 3,%,6%,7% 8,6%,% -5,8% 8,%,8%,% -,5% -,6% US IG Euro IG Infl Linked US Treas. US HY US HY -,5% 8,%,8%,% 7,%,% -yr ann. 9,9% US HY 7,5% 9,% EM Debt 6,6% 7,8% US IG 5,5% 6,9% Portfolio 5,6% 6,9% Euro HY 6,9% 6,3% US Tre as.,% 5,% Euro Gov 5,% For those embracing the whole fixed income universe there are still opportunities even with rising interest rates. Euro Gov, ,,5,3-7,% US Tre as. -,7% 5,5% Euro HY 5,5%,5% Euro HY,5% 3,8% Infl Linked 3,8% -6,% US IG 5,% -,% US IG,3%,5% Euro IG,5% Infl Linked -, 9 8,,3, -,3% EM Debt -8,3% 5,3% Infl Linked 5,3% -,6% Euro IG -,6% 3,% Euro Gov 3,% -8,8% US Tre as.,3% -3,% US Treas.,% 3,% Infl Linked 3,% 6 Source: (All charts) Barclays, BofA/Merrill Lynch, FactSet, J.P. Morgan Economic Research, J.P. Morgan Asset Management. YTM = Yield to maturity. Annualised return covers period 7 to 6. US HY: BofA/Merrill Lynch US High Yield Constrained; EM Debt: J.P. Morgan EMBI+; Euro HY: BofA/Merrill Lynch Euro Non- Financial High Yield Constrained; US IG: Bloomberg Barclays US Agg. Corporate Investment Grade; US Treasuries: Bloomberg Barclays US Agg. Gov. Treasury; Euro IG: Bloomberg Barclays Euro Agg. Credit Corporate; Euro Gov.: Bloomberg Barclays Euro Agg. Government; Infl Linked: Bloomberg Barclays Euro Gov. Inflation-Linked. Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): % Euro Gov.; 5% US Treasuries; % Linkers; 5% US IG; % Euro IG; % US HY; 5% Euro HY; 5% EM Debt. Returns are unhedged in euro and local currencies. years of weekly data is used to calculate the correlation to the UST and bunds. Guide to the Markets - Europe. Data as of 3 September 7. Source: Guide to the Markets Europe, page 6 The duration of the Barclays Global Aggregate has increased from.6 years in 99 to 7 years in 7. QUARTERLY PERSPECTIVES Q 7

5 US in late cycle The US economy is now late cycle, but near-term recession risk remains low The unemployment rate in the US shows that the labour market is now in the late part of the economic cycle. Unemployment has rarely been at such low levels. Clearly, in the near term, this is good news for the US economy, supporting consumer confidence. However, it does raise the probability of a recession in the medium term (the next years). The unemployment rate has recently fallen below estimates of full employment from both the US Federal Reserve (the Fed) and the Congressional Budget Office. This is the unemployment rate at which wage growth should theoretically start to accelerate, as workers bargaining power increases due to an erosion of labour market slack. In the past, the economic expansion has tended to last between years after the point at which the unemployment rate has fallen below full employment. It is notable that despite very low unemployment, wage growth currently remains relatively low. OVERVIEW The US economy has entered late cycle, with the unemployment rate close to previous lows. Low unemployment and healthy economic growth have historically led to a rise in wages, core inflation and interest rates. Despite being late cycle, near-term recession risk remains quite low. Wages and interest rates probably have room to rise from low levels before they cause problems for companies and the economy. US labour market GTM Europe US unemployment rate and wage growth %, wage growth is year on year Global economy Unemployment August 7:,% Wage growth Source: BEA, FactSet, J.P. Morgan Asset Management. Wage growth is average hourly earnings of total private production and non-supervisory employees. Guide to the Markets - Europe. Data as of 3 September 7. August 7:,3% US unemployment has fallen to,%, close to previous cycle troughs. Source: Guide to the Markets Europe, page J.P. MORGAN ASSET MANAGEMENT 5

6 Wages and core inflation should rise The trillion-dollar question in economics at the moment is why falling unemployment has not led to an acceleration in wage growth. Nearly all measures suggest the labour market is tight, but some economists argue that a combination of globalisation, automation and the new gig economy are keeping wage growth depressed. While these factors probably are weighing on wage growth, we do not believe that the historical relationship between a tight labour market and rising wage pressures is likely to have disappeared completely. In fact, several indicators suggest that wage growth should soon start to accelerate. The National Federation of Independent Businesses survey shows more firms are planning to raise wages. It also shows an increase in plans to hire new staff and a rising level of firms with job vacancies that they are struggling to fill. Workers are also positive about the labour market. The Conference Board Consumer Confidence survey shows a rising number of people think jobs are plentiful unsurprising given that job openings are at the highest level since. This is leading to an increase in the number of people quitting their jobs. Job moves tend to come with pay rises and as more people start to move jobs, companies come under increasing pressure to pay their existing staff more in order to hold onto them. Core inflation has fallen so far this year, dragged down almost entirely by a change to mobile data plans and base effects for medical services after a price surge in 6. However, if wage growth starts to accelerate core inflation should start to rise again. The positive economic outlook signalled by the current high level of the ISM Manufacturing Business Survey is another signal that has historically tended to flag that core inflation should soon start to rise. US inflation and wages GTM Europe 3 ISM Manufacturing and core inflation Index level, advanced 8 months (LHS); absolute change in year on year core CPI in % (RHS) 7 ISM Manufacturing 6 Recession,8,8 Global economy 5 Core CPI 3 '89 '93 '97 ' '5 '9 '3 '7 -, -, -, Wage growth and companies planning to raise wages % change year on year (LHS); % of businesses (RHS) 5 NFIB companies planning to raise wages 7 Wage growth and US quit rate % change year on year (LHS); % of total employment (RHS) 5 US quit rate,6, 3 7 3,8 Wage growth ' '3 '5 '7 '9 ' '3 '5 '7 Wage growth ' '3 '5 '7 '9 ' '3 '5 '7 Source: (Top) ISM, Thomson Reuters Datastream, J.P. Morgan Asset Management. Light grey columns indicate recessions determined by NBER. (Bottom left) BLS, NFIB, Thomson Reuters Datastream, J.P. Morgan Asset Management. NFIB companies planning to raise wages is a -month moving average. Wage growth is average hourly earnings of total private production and non-supervisory employees. (Bottom right) BLS, Thomson Reuters Datastream, J.P. Morgan Asset Management. US quit rate is a three-month moving average. Wage growth is average hourly earnings of total private production and non-supervisory employees Guide to the Markets - Europe. Data as of 3 September 7. -3,, More people quitting their jobs could lead to a rise in wages. 3 Source: Guide to the Markets Europe, page 3 6 QUARTERLY PERSPECTIVES Q 7

7 The economy should be able to withstand some increase in wages and interest rates If wages and core inflation do start to rise, the Fed may have to put interest rates up faster than the market is currently expecting. In the medium term, the risk is that rising wages start to put pressure on corporate profits and rising interest rates increase the cost of servicing both corporate and consumer debt. Eventually, companies might respond by cutting business investment and staff in an effort to preserve profitability. While this makes sense for an individual company, when many companies cut costs at the same time, it can trigger a recession. Consumers may also reduce spending in response to higher borrowing costs. The good news is that interest rates and wages will be rising from a very low starting point, so the economy can probably withstand at least one more year of interest rate rises and wage acceleration. Beyond the next months, in the absence of an external shock, the timing of the next recession could well be determined by the pace at which wage pressures accelerate and interest rates rise. INVESTMENT IMPLICATIONS Rising wages and inflation could cause US interest rates to rise faster than markets are expecting, with negative implications for US government bonds. The risk of a US recession in the next years is rising. However, if wage growth and interest rates remain low or productivity picks up, then the cycle could potentially last longer. Despite rising medium-term risks, the key point is that low recession risk in the next 8 months still suggests a continued positive environment for US equities in the near term. US wages and interest rates GTM Europe US wage growth and Fed funds rate % Fed funds rate (LHS); % change year on year (RHS) Recession Wage growth 6 Global economy Fed funds rate '8 '87 '9 '93 '96 '99 ' '5 '8 ' ' '7 Source: Thomson Reuters Datastream, US Federal Reserve, J.P. Morgan Asset Management. Wage growth is average hourly earnings of total private production and non-supervisory employees. Light grey columns indicate recessions determined by NBER. Guide to the Markets - Europe. Data as of 3 September 7. 3 Wage growth and interest rates have normally had to rise to higher levels before the economy enters recession. Source: Guide to the Markets Europe, page J.P. MORGAN ASSET MANAGEMENT 7

8 3 European equities and the euro Blowing tailwinds support the eurozone and the euro In the second quarter, eurozone GDP grew at,3% year on year the fastest growth rate since. The unemployment rate is falling fast to 9,%, down from the peak of,% in 3. Economic and consumer confidence reached -year highs and leading indicators are raising expectations for next quarter s growth. Faster growth is not yet translating into meaningfully higher core inflation, which remains below the ECB s target of %. For this reason, the central bank is maintaining its very dovish tone, declaring that rates will remain unchanged well past the end of quantitative easing. Despite still-low inflation, a reduction in QE is likely to start in January 8. The euro has strengthened on the back of stronger growth and expectations of tighter monetary policy, but this is unlikely to derail the recovery in the eurozone. Consumption contributes around 55% to eurozone GDP vs. 5% for net exports. The effects of the rebound in consumption on the recovery are more relevant than the risk of a stronger euro, which represents a manageable headwind. Euro exports still grew strongly before 8 despite a much larger appreciation in the euro than we have recently witnessed. OVERVIEW Europe continues to show signs of a solid and broad-based recovery. The expansion is accelerating thanks to falling unemployment and rising consumption. The European Central Bank (ECB) is likely to start reducing its quantitative easing (QE) purchases next year, with interest rates only rising once QE has come to an end. A stronger euro does not mean European companies cannot still deliver strong earnings growth Eurozone: GDP and inflation GTM Europe Europe economy Contribution to eurozone real GDP growth Contribution to eurozone CPI inflation % contribution to GDP growth, change year on year % contribution to headline inflation, change year on year 3 3,5 Average since Q7 3,,3%,3%,5 - - Government Change in inventories Net exports Investment Consumption GDP -3 ' ' ' '3 ' '5 '6 '7,,5,,5, -,5 Food, alcohol, tobacco Core rate -, Energy CPI* -,5 ' ' ' '3 ' '5 '6 '7 Source: (Left) Eurostat, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Right) Eurostat, FactSet, J.P. Morgan Asset Management. *CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food, alcohol, tobacco and energy. Guide to the Markets - Europe. Data as of 3 September 7. ECB inflation target The eurozone recovery is being driven mainly by growing domestic consumption. Source: Guide to the Markets Europe, page 8 QUARTERLY PERSPECTIVES Q 7

9 The tide is turning for European equities Many investors are still cautious about investing in Europe. In 6, political uncertainty, driven by the rise of populist parties, led to large outflows from European equities. This year, however, flows have returned to European equities. Election risks did not materialise and better earnings and economic momentum has led to some increase in investor confidence in the region. The outlook for European corporate earnings will be key for the future performance of European equities. The recovery in profit margins in Europe is lagging significantly behind the US. However, in the last nine months, European margins have started to improve. This is an indication that some of the margin gap is cyclical and European companies are profiting from the acceleration in global growth and the recovery in the eurozone. Recent euro strength versus the US dollar has raised some investor concerns. A stronger euro could prove a drag on earnings and revenues from abroad. However, investors should keep in mind that roughly 5% of revenues of European companies come from inside the EU, so strong domestic growth should boost these domestically driven earnings. Meanwhile, strong global growth should more than offset the drag on international earnings from a stronger euro. Pre-8, despite a much stronger rally in the euro, European companies were still able to triple their earnings per share. INVESTMENT IMPLICATIONS Strong domestic European growth, combined with a solid global growth backdrop, should continue to support the recovery in European equities. If the euro appreciates further, this could favour domestic focused companies over exporters. Nevertheless, exporters should still be able to grow their earnings even if the euro appreciates further as the boost from healthy global growth offsets the drag from the currency. European equities GTM Europe Equities European earnings vs. the euro Last months earnings per share, euros (LHS); US dollars per euro (RHS) MSCI Europe EPS,7,6,5,,3,, Europe vs. US operating profits margins %, earnings per share / sales per share '7 '8 '9 ' ' ' '3 ' '5 '6 '7 European equities flows EUR billions, cumulative S&P 5 MSCI Europe Pre-8, a strong euro did not prevent earnings from tripling. 5 EURUSD,9 -, '98 ' ' ' '6 '8 ' ' ' '6,7-8 Jan 6 Apr 6 Jul 6 Oct 6 Jan 7 Apr 7 Jul 7 Source: (Left) MSCI, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Top right) MSCI, Standard & Poor s, Thomson Reuters Datastream, J.P. Morgan Asset Management. (Bottom right) GFICC Quantitative Research Group, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 3 September 7. Source: Guide to the Markets Europe, page J.P. MORGAN ASSET MANAGEMENT 9

10 Japan: Improving corporate governance The Japanese economy is doing well Japanese growth has been robust so far in 7. Inflation levels remain low, but concerns over the economy falling back into deflation seem to be subsiding. Japanese earnings have also been detaching from a reliance on a weak yen, which is supportive of Japanese equities. The Tankan business survey, which asks thousands of Japanese companies about current business conditions, as well as their intended activities over the next year, is showing an improvement. Both manufacturing and non-manufacturing industries are heading upwards, suggesting a broad pick-up in the Japanese business environment. The labour market remains tight, with the unemployment rate continuing to trend downwards. The jobs-to-applicant ratio shows that there are over 5 jobs available for every job seekers. Despite this tightness in the job market, wage growth remains low. OVERVIEW Japan s economy looks to be in good shape, with strong GDP growth, low levels of unemployment and improving business sentiment. Corporate governance best practices have taken longer to be adopted by Japanese companies than other developed markets. This presents upside potential for stocks that can improve their delivery of positive shareholder returns. Japanese equity valuations are not expensive compared with history or other markets, and exhibit weaker correlations to other major equity markets. This means that investing in the asset class can help to diversify portfolios. Japan economic indicators GTM Europe 9 Global economy Real wage growth and labour market % change year on year, six-month moving average (LHS); % (RHS) Real wages Unemployment rate (inverted) Bank lending and job-to-applicant ratio % lending growth year on year (LHS); ratio of number of jobs to applicants (RHS) 8 Job-to-applicant ratio,6,,, Tankan business conditions Index level 6 Manufacturing Non-manufacturing - - -,8,6,, Bank lending is finally rising after years of deflationary credit contraction '8 '8 '88 '9 '96 ' ' '8 ' '6 Bank lending (y/y) -8 '9 '96 '98 ' ' ' '6 '8 ' ' ' '6, Source: (Top left) FactSet, J.P. Morgan Asset Management. (Bottom left and right) Thomson Reuters Datastream, J.P. Morgan Asset Management. Guide to the Markets - Europe. Data as of 3 September 7. 9 Source: Guide to the Markets Europe, page 9 QUARTERLY PERSPECTIVES Q 7

11 A sea change in corporate Japan A shift in corporate culture is underway in Japan. Corporate governance, and the focus on increasing returns to shareholders, has been improving. Historically, Japanese companies have held large amounts of cash on their balance sheets when compared to other global companies. Japanese corporates are increasingly using the money that they once held as cash to pay dividends and initiate share buybacks to the benefit of equity investors, as seen on the left-hand chart. The increased use of return-on-assets and return-on-equity targets is another sign of the growing focus on delivering shareholder returns. Japanese companies have notably lagged other major markets in this respect, often focusing more on building market share than on return on investment. However, the proportion of Japanese companies that are now including return-on-investment targets in their medium-term plans is growing. We have also seen the quality of company boards improve over the past few years. The number of businesses appointing external directors has doubled since and there has been a shift towards appointing multiple external directors to increase the independent influence on boards. Equities Japanese equities: Corporate governance Listed companies dividend pay-out and share buybacks Yen trillions 6 8 Share buybacks* Dividends '9 '95 ' '5 ' ' GTM Europe 5 Companies citing ROE & ROA targets in medium-term plans % of 8 companies ROA ROE Appointment of outside directors at Japanese companies Total 8 6 At least one external director, not independent One independent external director At least two external directors 6 INVESTMENT IMPLICATIONS Japanese equities could deliver positive returns over the medium term, driven by attractive valuations and an improving business environment, which is supported by healthy growth and continuing accommodative monetary policy. In the past, the performance of Japanese equities has been tied to the strength of the yen against the dollar. In recent times, Japanese earnings have been less dependent on a weak currency and investing in this asset class should no longer be viewed as just a currency play. In a market where many businesses and industries face structural challenges, there will be a wider divergence in the performance of companies going forward. Active managers have the ability to avoid stocks with less promising outlooks, as well as focus on a combination of new industries for which Japan has a sustainable advantage and corporates that aim to deliver higher shareholder returns. Adoption of shareholder return targets has increased, but still has room to run. Source: (Left) Nomura, J.P. Morgan Asset Management. *Share buyback data is for repurchases of common stock, excluding repurchases from Resolution and Collection Corp. and repurchases of preferred stock collected by Nomura. 7 figures for share buybacks and dividends are estimates. (Top right) Goldman Sachs, Japan Investor Relations Association, J.P. Morgan Asset Management. ROE is return on equity and ROA is return on assets. (Bottom right) Goldman Sachs, Tokyo Stock Exchange, J.P. Morgan Asset Management. Companies are TSE companies. Guide to the Markets - Europe. Data as of 3 September 7. 5 Source: Guide to the Markets Europe, page 5 J.P. MORGAN ASSET MANAGEMENT

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