Market Commentary 15th April 2019 from Edward Cameron

Market Commentary 15^th April 2019

Equity Indices

UK

The FTSE 100 ended the week slightly down at 7,437 on Friday following news that the Brexit deadline has been extended to 31^st October 2019. GDP data released also weighed on the market.

UK focused companies benefitted from the Brexit extension as a no deal Brexit was avoided, with the FTSE 250 up 0.9% across the week. The more globally exposed FTSE 100 did not see such a benefit, as it was a benign week for global markets on the whole.

GDP growth for the three months to February was 0.3%, unchanged from the previous month’s figures. Whilst services and manufacturing figures were up, construction was down 0.6%.

Travel firms and airlines benefited most from the Brexit extension as the uncertainty over summer holiday disruption eased. easyJet ended the week up 8.7%, with TUI up almost 5%. In contrast, consumer goods company, Reckitt Benckiser, ended the week 7.5% down after Indivior, a pharmaceutical company it formerly owned, was indicted by the US Justice Department for illegally increasing prescriptions. Investors fear that regulators may come after Reckitt Benckiser if Indivior are unable to pay a $3billion fine.

Europe

European equity markets edged slightly upwards last week, with the FTSE All World Index – Europe ex UK up 0.7% and France’s CAC up 0.5% off the back of a strengthening Euro. Germany’s DAX was however slightly down across the week.

Further progress in the US/China trade talks also helped buoy European markets. Global indices were largely subdued, in comparison to the volatility seen over the past 6 months. With Brexit again deferred and US/China trade talks slowly progressing, markets did not have much to react to.

US

US equities generally saw rises this week, with the S&P 500 ending the week 0.5% up and the NASDAQ 0.6% up. Further progress in trade talks with China, coupled with strong figures released by the big banks helped markets rise.

Both JPMorgan Chase and Wells Fargo reported increases to net income in Q1, both beating profit estimates, and this helped US equities rise. The other four big 6 banks are due to release their first quarter results shortly. The more industrial focused Dow Jones ended the week down slightly, with healthcare stocks weighing on the index.

US Treasury Secretary, Steven Mnuchin, told reporters that a mechanism to enforce a trade deal between the US and China had largely been agreed, sparking increased optimism over a deal.

Asia

Asian markets ended the week slightly down following figures released which showed Chinese imports decreased in March and expectations that the Chinese economy will slow in 2019. The FTSE All World Index – Asia Pacific was down by 0.1% across the week and the Hang Seng was down 0.5%.

Asian markets generally reflected benign global markets over the week.

Bond Yields

UK

The 10-Year Gilt yield continued to rise last week, ending the week 8% up at 1.21%. With investor optimism rising as a result of continuing progress in US/China relations and generally positive economic data from the US, China and Europe, bond yields rose as investors were happier to allocate monies back to riskier assets such as equities.

Europe

10-Year German Bund yields ended the week 5 basis points up at 0.6%. Despite falling 0.2%, Eurozone industrial production beat analyst expectations of a 0.5% fall. Investor appetite for equities increased and bond yields rose as appetite for government debt waned.

Greece’s 10-year bond yield dropped to a 14 year low of 3.34% following good employment figures. A reduction in the bond yield represents a reduction in the risk of the bond defaulting.

US

US 10-Year Treasury yields ended the week 2.8% up at 2.57% off the back of increased optimism surrounding US and China, particularly an increase to Chinese exports. Following a drop in exports in February, Chinese exports rose above analyst expectations in March, soothing investor concerns around the state of the Chinese economy.

Currency

GBP / USD – Current 1.3074 Previous 1.3038

GBP / EUR – Current 1.1568 Previous 1.1625

Sterling was largely unchanged against the Dollar and fell by 0.5% against the Euro. The pound initially suffered against the Euro following the Brexit extension, although traders are expected to start betting on the currency again now that there is over 6 months until the next deadline. Stronger than expected European economic data also helped the Euro to strengthen.

Any rise in Sterling as a result of the diminishing chance of a no-deal Brexit was offset by a rising Dollar, as a result of stronger than expected US economic data and continued progress in US/China trade talks.

Commodities

Gold

The Gold spot price ended the week flat at $1,290 per ounce on Friday.

With equity markets generally subdued over the past week the Gold spot price remained largely unchanged.

Oil

Oil prices continued to rise slightly last week, with Brent Crude ending Friday 1.7% up at $71.55 per barrel.

Global oil supply dropped in March as Venezuelan output was affected by US sanctions and power cuts. OPEC continue to limit oil supply in an effort to prop up prices.