FINANCIAL REPORT - MARCH 2015

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1 FINANCIAL REPORT - MARCH 2015 SUMMARY OF THE MACROECONOMIC INFORMATION The macroeconomic scenario Deflation in Europe, the USA well. The passage of years is very positive for the United States: the positive data on the economy should favor the change in monetary policy. After a year-end worse than expected, the outlook for 2015 appear weak to the euro area: high unemployment and rising risks on the scenario in prices prompted the ECB to intervene. Positive but not particularly high should be the contribution to the recovery resulting from the oil price and the exchange rate depreciation. The stock market The QE favors risk appetite The quantitative easing (buying securities on the market) announced by the Bank Centered European, exceeded expectations in terms of quantity, favors risk appetite and restoring confidence to investors. In this context, much longer v European markets, despite a climate day extreme volatility. The markets outweigh without trauma victory Tsipras in Greece, although the remains alert for you next elections in Spain. The bond market Profit-taking after the QE Arrives expected, but not without new compared to the advances, the announcement of quantitative easing (QE) of the ECB: the new securities purchase program incorporates the previous and extends to supranational bonds and especially the euro area government securities.

2 Currencies Strong dollar, yen and swear downward Does not change the picture on the exchange market: ii dollar consolidated its uptrend. The euro, in dropped in earlier 2015 after the launch of QE in January, recovers part of the positions waiting to March, when actually buying securities ECB yes materialize on the market. The raw materials The collapse of oil prices influence the sector commodity We reiterate a decided weakness for all segments of the commodity, at least in the first part of The risk aversion that followed the sharp reversal in oil, combined with weak growth data especially in Europe and Asia, pushing traders away from commodity in a market that sees a sharp rise in volatility with risk appetite operators anchored to the geopolitical events.

3 MACROECONOMICS USA: petroleum consumption and effect support the recovery Data released last month showed a year-end firmer expectations for GDP and have fueled expectations upward for THE improving economy can rely on a dynamic robust consumption and production activity. Despite confidence indices and durable goods orders have shown a significant year-end adjustments, the long-term trend remains positive. As an additional element of support to the economic cycle, at year yes confirmation particularly strong evolution of the market for labor. The only drawback for now is the dynamics of wages, which in December showed modest growth rates. This element is reflected on inflation so that, in turn also depressed by the effect of the decline in oil prices, recorded a marked slowdown. We believe that the Central Bank may be in a conflict situation than the two objectives of monetary policy. If in fact the balance on the labor market could be achieved in a short time, however, inflation could remain very limited in the short and medium term. It is likely therefore that the Fed is pursuing observation of the evolution of macroeconomic data at the center of its evaluations in defining the timing and method of turning on interest rates. Excluding the next two meetings (January and March), the first rise could be announced in late April or, as in our baseline scenario, in mid-june. Euro area: deflation and weak growth 2014 ended with a growth rate still weak and lower than expected earlier this year for the euro zone economy, which has been conditioned by the persistence of some elements of structural weakness, to which are added new geopolitical tensions. The last signals from macro data do not leave thinking about a significant turnaround in One of the main structural elements of the shooting brake consists of the labor market which, in aggregate, after a significant drop in unemployment in the first part of 2014, between August and November saw the benchmark index to remain stable at 11.5%, making it well above the historical average and even of alarm levels. The most significant, however, is that, nationwide, there were extremely heterogeneous dynamics: while the labor market in Spain and Germany saw new and significant progress, for France and Italy there are

4 worrying increases in unemployment. Critical appears also the framework for inflation: If the falling price of oil is expected to produce positive effects on GDP growth in the euro zone will have a negative effect on consumer prices. If yes then at this stage confirm the elements of brake on growth arising from high unemployment, new support may come from some external factors, such as the drop in oil prices and the exchange rate depreciation against other major currencies reference.

5 SUMMARY OF OPERATING SUGGESTIONS The macroeconomic scenario continues to be characterized globally by a slight improvement in the main indicators of real economic activity, although in the short / medium term to influence markets will be mainly political events and linked to the activities of the major central banks. The US economy continued to show an overall good health, supported by progressive improvements in the labor market while in the euro area, despite the critical issues related to unemployment, low inflation and low growth, in recent weeks there has been some improvement leading indicators and confidence The economies of countries whose central banks are still in expansionary mode as euro area, Japan and some emerging countries in the coming months should benefit from monetary policy Another element of support to economic growth in the short term should come from dynamics of the price of oil, which, especially for importing countries, could begin to result in greater availability of consumer spending, the European bond market, both core and peripheral, in January was supported by expectations of further extraordinary measures to the ECB announced actually encounter day monthly monetary policy January 22, the Governing Council of the ECB, leaving unchanged the interest rates at record low levels, has announced a program of quantitative easing, which will start in March and end in late September The extension of the program will depend on the achievement of objectives in terms of inflation, the dynamics of which has recently proved weaker than expected in the euro area. The outcome of the elections in Greece on 25 January and the emergence of tensions between the international authorities and the new government have brought market volatility. At the moment, however, was rather limited the impact of the evolution of the political landscape in Greece in European bond markets The stock markets in recent weeks have been characterized by an increase in volatility, the liver mainly to fears the start of a new phase of political instability in the Eurozone. However you new monetary policy measures taken by central banks continue to support expectations of economic recovery and contributed to the positive trend recorded by equity markets year to date, We improve our vision than high asset class over the medium term, bringing to moderately positive, in a scenario of gradual improvement of the framework of

6 various world economies and the gradual strengthening of the signs of a reversal of the cycle, supported by monetary stimulus of Central Banks, however fears of a new phase of political instability in the Eurozone Surveys and disappointing, could increase the volatility in the markets, so we recommend a cautious approach to equity investing in the early part of the year using instruments with non-directional strategies.

7 STOCK MARKET The QE supports prospects in! Eurozone quantitative easing announced by the Bank Centered European, exceeded expectations in terms of quantity, favors risk appetite and restoring confidence to investors. On the other hand, the greatest risks are linked to the low growth in Europe, even if the QE should encourage the re-start, which adds so the price of oil is too low because it is a symptom of the difficulty of growth of the global economy. Also weigh the risks related to the slowdown in the pace of growth in emerging countries, including China, and the likely rise in US interest rates, but at the moment it is not expected particularly aggressive. To monitor the evolution of the negotiation between the government greek and international authorities. In this context, definitely earn the European markets, despite a climate day extreme volatility. Recover strength home directories, supported mainly by the bank and by the reform of the popular. quantitative easing lays the foundation to support growth, one of the most important problems of Italy together with the public debt, now at 131.8% of GDP. The weak euro allows a recovery of competitiveness and oil at low prices favors the resumption of the strong dependence on foreign countries in terms of energy, being our country a highly energy importer. For 2015 it is estimated GDP growth of 0.4%, following the decline of 0.4% of It continues the relative strength of the DAX (the German index) renewing highs, like the one on CAC (the French index), which technically provides important signals. US indices lose relative strength, bouncing though by important technical areas; to weigh in this context is the weakness of the oil, the appreciation of the dollar and some of the quarterly financial sector very encouraging that increase volatility. The US market can still count on the strength of the economy in a context in which the Fed confirms an attitude "prudent" in the path of rising interest rates. On the other hand, low commodity prices and concerns facing the international economic, the resized part by QE in Europe, however, cause an increase in volatility * ln this context, our general idea on equities is moderately positive for both lists European and US.

8 STOCK MARKET OPERATIVS SUGESTIONS In a context of gradual improvement in the global economic scenario and a scenario of prolonged weakness in returns on asset classes of bonds, the stock market continues to be an attractive investment opportunities over the medium term. In geographical terms, our preference continues to be directed to the European market, where the high liquidity injected into the system by the ECB, should favor investment in riskier asset classes and accelerate economic growth, with positive implications in terms of turnover and improvement of multiples of European societies, which currently valuations still affordable compared to the US, with a superior growth potential in relative terms. From a sector perspective, the improvement in the real economy should favor the more cyclical sectors and in particular those related to consumption, where the fall in commodity prices and the devaluation of the euro should support increased spending the consumer discretionary and contribute positively to the growth of the company margins, especially of the companies most exposed to the US market, favoring an increase in profitability for shareholders.

9 BOND MARKET Government bonds: get the expected QE, large and possibly extendable arrives expected, but not without new compared to the advances, the announcement of quantitative easing (QE) of the ECB: the new securities purchase program incorporates the previous and extends to supranational bonds and especially the euro area government. The main surprises are relative to the amount (particularly large and extendable) and the spectrum of maturities involved, extended to the 30-year bond. In terms of volume of purchases QE provides a flow of 60 billion per month between March 2015 and September 2016 for a total of more than 1,000 billion euro (of which about 800 in government bonds). The purchases will be conducted on the basis of equity shares held by each country at the ECB, with constraints both on the roof for each issuer and for the individual issues, in order not to alter the price formation and liquidity. The stated goal is to bring the interest rate and inflation expectations below, but close to the 2% target of the ECB. the "price" to pay for such an important program was sharing only very partial risk, even if the manner of implementation of the program minimizes this element of weakness. In Athens, in fact, the overwhelming victory of SYRIZA, anti-austerity party that does not recognize the Troika as an authority with which to deal, he's worried markets. the tug of war, for now at the start, could create additional short-term volatility in the markets, although at the time the contagion effect appears content. THE our central scenario remains the achievement of an agreement that would bring within at least in part the stress experienced in recent sessions in particular on Greek bonds. Corporate bonds: the ball still in the hands of Central Banks The implications of the new scenario day monetary policy for the sector of corporate bonds are on the whole positive. Improve the prospects of banks in peripheral countries (such as the Italian ones) with strong exposure to the sector of the domestic government. The devaluation of the euro, which in the wake of the announcement of QE has reached new multi-year lows, in our opinion, will favor the cyclical sectors and in particular those related to exports to areas outside Europe. YTD bonds corporal had a volatile path, guided,

10 on the one hand, the announcement of launching a QE "full-bodied" and, second, by the tensions in Greece and worries about the strength of the economic recovery. An interesting element is the relative underperformance of financial stocks. them banking sector could benefit from the increased capital strength of European banks, but in the case of those devices remain critical issues related to the weight of bad loans. Also weighing on the sector that the regulatory framework of the European system is in a phase motto dynamic and complex, characterized by constant change, between CUI, such as the adoption of capital ratios "ad hoc" on individual institutions. These changes increase the degree of uncertainty about the outlook, even profitability, banks.

11 BONDS OPERATIVES SUGGESTIONS In the euro area the prices of government bonds were supported by both the expansionary monetary policy of the ECB is the weakness of the economic scenario; longer maturities were also favored by the dynamics of inflation weaker than expected. In the US long-term maturities and extra-long curve reached new lows before rebounding following the excellent data on the labor market. The Fed in the coming monetary policy decisions will have to take more account not only the improvement in employment but also the dynamics of consumer prices. Recently, inflation expectations have remained particularly low in part because the delta decline in oil prices. Corporate bond sector: the risk premium required on European investment grade corporate sector has declined to 52 basis points, lowest level in seven years, as a result of further expansionary measures by the ECB that could encourage a further reduction in spreads. Despite the current scenario favors the sector, the level reached by the historic low rates of return makes at present particularly high valuations. Flexible strategies philosophically income: the minimum level of interest rates in all major developed areas, default rates are still low and the exchange rate fluctuations make it interesting to complete the bond investment with flexible tools that invest in a diversified manner of corporate and high emissions income is the developed countries that emerging countries.

12 CURRENCIES USD: dollar which benefits greatly from the message released by the Fed after the monetary policy meeting. The institute insists that at least until June there will be no movement on rates. In this scenario, we reiterate as the dollar, already entered into a framework of strengthening, could only take a pause in its movement dictated by the expectation of the Fed. EUR: The euro has recorded a sharp decline after the launch of QE by the ECB to a new low for 11 years. We do not exclude that the euro could fall further against the dollar in the area until 1.05 in the short term, especially when the actual purchase securities by the Central Institute will materialize. GBP: the macroeconomic framework in the UK although slightly weakened probably also because of the rise of the pound does not influence the attitude of the Bank of England. The institute confirmed a rate hike at the end of the 1st half of 2015, although we can not exclude a possible advance of such a move. JPY: the meeting of the Bank of Japan last January 21 ended without any change of monetary stimulus. The Bank, however, revised positive macroeconomic projections on growth and inflation. We reiterate as the sideways trend that the yen is accumulating (especially against the dollar) can be interrupted only if risk aversion were to increase.