Market Commentary 8th April 2019 from Charlie Hancock

Posted by melaniebond
Market Commentary 8th April 2019
Equity Indices
The FTSE 100 index built on last week’s positive performance as this week saw another period of gains across global equity markets. The index was up by 1.77% across the week, with the export driven index being boosted by simultaneous positive sentiment towards global equities and a weakening Pound Sterling.

With positive economic news coming out of China, the banking giant HSBC, who have significant operations in the region, saw their share price rise by around 4.8% across the week. Housebuilders also had a strong week, despite some weakness on Friday after Halifax published data showing that house prices dipped during March. Taylor Wimpey’s share price rose by 4.1% across the week, with Persimmon shares rising by around 2.5%.

European equity markets also had a positive week, with the FTSE All World Index – Europe ex UK rising by 1.35%. News released this week regarding the US-China trade dispute was some of the most positive on the matter so far, which helped Germany’s trade sensitive DAX index to rise by 2.8% across the week.

Data released on Friday showing that German industrial output rose in February provided a welcomed boost to European equities. Economic data for the region over the last few months has broadly been negative.

The S&P 500 index rose by 0.89% across the week, posting a daily gain for the 7th day in a row. This marked the longest winning streak for the index in 18 months, which was boosted by optimistic news on the US-China trade dispute together with positive data on US jobs.

February’s data on US employment showing 20,000 new jobs were added was disappointing, but March’s data which was published on Friday showed a strong bounce back, with 196,000 jobs added during the month. This beat most estimates and markets received this as a signal that US economic growth is not slowing as much as previously thought.

With oil prices rising to 2019 highs, energy was the strongest sector in the S&P 500 index this week. Despite investment bank UBS cutting their target price for the stock, Boeing Co saw their share price rise amidst further clarity on a software issue which caused last month’s fatal Ethiopian Airlines crash.

Asian equities followed the trend of equities in other regions across the globe, with the FTSE All World Index – Asia Pacific rising by 0.64%. Chinese equities posted strong gains across all major indices and Japan’s Nikkei 225 index was up by 1.95%. Indian equities were broadly flat after the country’s central bank cut the headline interest rate by 0.25% to 6%, with committee members citing weak inflation and slightly lower economic growth.

Asian equities rallied on Monday after encouraging data was published showing that manufacturing activity in China is improving. This was received by investors as a sign that stimulus measures by the Chinese government are working. Positive comments from Trump suggesting that Washington and Beijing have found some common ground also provided a further mid-week boost to Asian equities.

Bond Yields
10-Year Gilt yields rose slightly this week, with yields at around 1.12% on Friday. Yields slipped early on in the week as investors reacted to further uncertainty regarding Brexit.

This fall in yields was reversed later on in the week as demand for government debt fell. Investor sentiment was lifted as a result of positive economic data from the US, China and Europe, together with a report from the Financial Times suggesting substantial developments have been made in trade talks between the US and China.

10-Year German Bund yields turned positive this week, with yields rising to around 0.01% on Friday. News that German industrial output beat expectations in February amongst a surge in construction activity helped yields to rise, despite this being the first positive piece of data in months for the European economy.

With positive developments on global trade later in the week, risk appetite amongst investors increased further which caused capital to flow away from Bunds and into equities, helping yields on 10 year Bunds to rise above the 0% mark.

US 10-Year Treasury yields fell early on in the week, before rising again as demand for US government debt as a safe haven asset slipped. The 10-Year yield was broadly unchanged across the week at 2.5%.

News that the US added 196,000 jobs in March, exceeding estimates of around 170,000, helped to push yields higher. Economists commented that this is likely to mean wage growth continues to accelerate, but inflationary risks have not increased significantly and so the Federal Reserve is likely to continue to maintain their ‘patient’ stance.

GBP / USD – Current 1.3038 Previous 1.3103

GBP / EUR – Current 1.1625 Previous 1.1686

Sterling fell by around 0.5% against both the US Dollar and the Euro this week. The Pound suffered as a result of parliament failing to make any substantial progress on Brexit, with Theresa May writing to EU leaders to request a further extension to the UK’s departure date causing further uncertainty.

The gold spot price bucked the historic trend of falling as equity markets rise, with the price per ounce rising by around 0.3% this week to $1,292. Analysts commented that some of the rise could be attributed to positive news on manufacturing in China, which tends to lead to a rise in commodity prices.
The Brent crude oil price rose 1.9% this week to the highest price seen since November 2018. The price per barrel on Friday was around $70.34, with rises coming amidst positive economic data suggesting that demand will remain strong. In addition, there are concerns that further conflict in Libya could tighten supply from the region.