Log inMarket Commentary 30th July 2018
Equity Indices
UK – The FTSE 100 finished the week up approximately 0.6%, with volatility relatively muted. The main driving force was a barrage of earnings in the UK, with many UK companies reporting earnings over the week, with a mixture of positive and some more disappointing results.
Europe – The broad gauge for European equities, the FTSE All World Index – Europe ex UK, had a positive week recording a gain of 1.65%. Performance was strong throughout the week, with only a slight pull back on Wednesday, which was quickly reversed. The positive tone arising from the meeting between US President Donald Trump and Jean-Claude Juncker buoyed European equities. In Germany, the DAX rallied approximately 2.5% and helped to drive the move higher in the broad gauge for European equities. Much of the strength in the DAX emanated from the automakers, following positive discussion between President Trump and Jean-Claude Juncker regarding the US threat to levy tariffs on cars imported to the U.S.
US – In the US, the performance of the S&P 500 was more muted with the index finishing the week up approximately 0.4%. US stocks gave back much of the rally from the first half of the week, with the index declining on Thursday and into Friday. There were many US companies reporting earnings throughout the week, notably the large technology names, with both Facebook and Twitter missing on expectations and seeing sharp drops in their share price. In contrast, Google’s parent company Alphabet and Amazon both posted positive earnings. The US second quarter GDP reading came in at an annualised 4.1%, but even this was not enough to prevent a slight pull back from the highs of the week in the S&P 500.
Asia – The Broad Asia Pacific Equities gauge, the FTSE All World Index – Asia Pacific, rallied over 2% and recorded five consecutive days of gains. Reduced threats of further tariffs and more favourable rhetoric regarding a potential trade war really helped to drive Asian equities higher.
Bond Yields
UK – 10-year Government bond yields edge upwards over the week, with correspondingly valuations falling in the UK. This is as we move ever closer to the Bank of England’s Monetary Policy meeting this Thursday, where the markets are pricing in the possibility of a rise in the base rate from the Bank.
Europe – The 10-year German bund yield, reflecting government borrowing costs in the core of Developed Europe was broadly flat last week, with only a 1 basis point decline to 0.4%. The movement throughout the week was relatively muted, with yields remaining in a narrow range.
US – In the US, 10-year Treasury yields finished the week unchanged at 2.95%. Yields had risen earlier in the week, before falling back in the second half of the week, mirroring the slight pullback in US equity markets.
Currency
GBP / USD – Current 1.3103 Previous 1.3123
GBP / EUR – Current 1.1237 Previous 1.1201
Over the week, sterling was marginally weaker against the dollar, having reversed the gains sterling had made against the dollar, following an overall weaker dollar at the start of the week. Against the euro, sterling strengthened approximately 0.3%, bouncing from the recent lows amid continued discussions regarding the pathway for Brexit negotiations. Sterling will be in focus this week ahead of the US Federal Reserve interest rate decision on Wednesday and then the Bank of England’s Monetary Policy meeting on Thursday, where the Bank will make its decision on interest rates.
Commodities
Gold – The spot price for gold remain unchanged over the week, finishing at $1,224 per troy ounce. The stronger dollar over the last month has made gold look less attractive to international investors and with the US on an interest rate tightening cycle, gold looks set to continue underperforming.
Oil – The spot price for Brent Crude oil rose approximately 1.7%, finishing at $74.29 per barrel as concerns over global supply disruptions persisted.
Portfolios
Following a week of positive equity returns, all Growth portfolios from Score 2 to Score 6 saw positive returns and all comfortably outperformed their respective benchmarks. The Super Cautious portfolio also delivered a positive performance, up 0.27%. The Lite portfolios also performed well over the week, again outperforming their respective benchmarks, with the more cautious Score 2 & 3 slightly underperforming the active Growth portfolios. The Ethical and Ethical Bias portfolios also performed well, being ahead of their respective benchmarks and ahead of the Growth portfolios across the majority of the different risk scores.