Market Commentary 11th March 2019 from Charlie Hancock

Posted by melaniebond
Market Commentary 11th March 2019
Equity Indices
The FTSE 100 index was down by 0.42% across the week as equity markets around the globe fell. The index started the week on a positive note, rising by 0.8% between Monday and Wednesday, before falling on Thursday and Friday as a result of concerns around the Eurozone’s lagging economy and slowing growth in the US.

A weaker pound helped to boost large cap UK equities early in the week. Miners Rio Tinto and BHP, in addition to housebuilder Persimmon all reached their ex-dividend date on Thursday which affected the index, as companies typically see their share price adjust downwards once their shares trade ex-dividend. The financial sector was also negatively impacted by insurance giants Aviva and Admiral reporting weaker than expected results.

European equity markets were broadly flat for the first half of the week, before sliding after investors reacted to actions from the European Central Bank (ECB), which were deemed to be a sign that the central bank are more concerned about growth in the Eurozone than previously thought. The FTSE All World Index – Europe ex UK was down by 1.9% across the week, whilst Germany’s DAX index was down by around 1.2%.

Weak data for German industrial orders led to weakness in the Auto sector, which dragged down the DAX index. Stocks in the banking sector across Europe were dragged down as investors reacted to the news that the ECB would not be likely to raise interest rates in the coming months. Conversely, stocks in the real estate sector rose on the expectation of borrowing costs remaining lower for longer.

The S&P 500 index posted daily losses, falling by around 1.8% across the week. Analysts commented that the early week performance was likely due to profit taking in the absence of a catalyst to drive markets in any direction. There was little update on the US-China trade negotiations, which is likely to have made some investors anxious. Poor sentiment on the health of the Eurozone economy resulted in falls on Thursday, whilst weaker than expected US employment data spooked investors on Friday.

The energy sector was the worst performing of the major sectors in the S&P 500 index, with falling oil prices adding to the negative sentiment experienced across the wider market. The healthcare sector also suffered after the commissioner of the Food & Drug Administration agency unexpectedly resigned, leading to uncertainty around the regulation of companies falling under the agency’s remit. The pharmaceutical giant Pfizer saw their share price decline by nearly 6% across the week.

The FTSE All World Index – Asia Pacific fell by around 2.2% across the week. Data showing that Chinese exports/imports contracted in February weighed on Asian markets, however, further fiscal stimulus measures announced in China helped to alleviate some of the negative sentiment. The Chinese government announced their GDP growth target for 2019 to be between 6% and 6.5%. Japan’s Nikkei 225 index declined by around 1.9% across the week after briefly reaching a three-month high.

Defence stocks in Asia performed strongly this week after investors took particular interest in this sector, following a report from a South Korean news agency and two US think tanks which suggested that North Korea has restored a missile launch site it had previously started to dismantle.

Bond Yields
10-Year Gilt yields were around 1.19% on Friday after a fall of around 6.3% from the levels seen at the beginning of the week. Falling global equity markets, together with a stronger pound, lead to increased purchasing of UK government debt this week, which pushed yields downwards.
10-Year German Bund yields were around 0.07% on Friday, hovering close to the 0% level. Having started the week at around 0.16%, the 10 year yield fell by around 54% after the ECB announced a new facility of low cost loans for European banks in an attempt to boost liquidity, as well as signalling there would be no interest rate rise until the end of 2019 at the earliest.
US 10-Year Treasury yields fell by around 3.3% across the week with yields sitting at around 2.63% on Friday. The fall in equity markets around the globe prompted an increase in the flow of capital to government debt. News that the US economy added just 20,000 jobs in February versus previous estimates of 180,000 also prompted investors to seek the perceived safe haven of US treasuries.
GBP / USD – Current 1.3015 Previous 1.3202

GBP / EUR – Current 1.1585 Previous 1.1618

After a strong start early in the week, the pound weakened by around 1.4% against the US dollar and 0.3% against the Euro, with the Eurozone’s currency struggling in its own right this week. Reports that there appears to be little progress between Theresa May and key figures in the European Union has heightened the uncertainty around Brexit, knocking confidence in the pound.

The gold spot price rose by 0.9% this week to reach $1,298 per ounce. The price of the precious metal had declined slightly before spiking on Friday, after it was reported that the US economy created significantly less than expected jobs last month.
The Brent crude oil price remained relatively stable this week, with prices still around the $66 per barrel mark. Whilst supply has been steadily controlled by key oil producing nations in recent months, the impact of softer economic data globally has kept the price below $70 per barrel so far during 2019.