Market Commentary 23rd April 2019 from Edward Cameron

Posted by melaniebond

Market Commentary 23^rd April 2019

Equity Indices

The FTSE 100 ended the week 0.3% up at 7,460 on Thursday as Easter meant a shortened trading week. This shortened week affected most markets, with another fairly benign week for global markets.

The FTSE 100 saw early week gains as Sterling weakened against the Dollar, which resulted in the export heavy index benefitting and strong employment figures. However, gains were pared on Thursday as weak manufacturing data from Germany and France was released, prompting concerns over a slowdown in the Eurozone.

The UK employment rate hit 76.1%, the joint highest on record, with wage growth in February outpacing inflation. This fed through to the domestic focused FTSE 250, which posted a 0.6% rise over the week.

Shares in sports retailer JD Sports jumped over 15% to reach record highs following a 15% growth in profits, beating analyst expectations. Card Factory also saw a 15% gain after forecasting a special dividend. TUI continued to benefit from the delay to Brexit, up over 8% as there is now less concern over disruption to summer holidays to Europe.

Consumer supplies firm Bunzl posted a loss of 6.4% over the week following a slowdown in revenue growth.

Europe

European equity markets edged slightly upwards last week, with the FTSE All World Index – Europe ex UK up 0.3%. Germany’s DAX saw a larger weekly rise, up 1.9% across the week.

Better than expected growth figures from China suggested the country is more resilient than feared when it comes to the trade war with the USA. This helped push global markets up and offset any losses as a result of weak manufacturing data in Europe. PMI data showed that manufacturing in Germany and France continues to contract.

Despite poor manufacturing data, the Brexit delay seems to have improved investor sentiment in Germany. The German Investor Sentiment Index increased for the 6^th straight month to reach 3.1, smashing expectations of 0.8. In addition, whilst manufacturing contracted, the services sector indicated expansion. Services are seen as a better indicator of domestic demand.

Wednesday showed the fickle nature of football and its effect on markets, as shares in Italian club Juventus dropped more than 22% on open following their elimination from the Champions League on Tuesday night.

US equities were a mixed bag last week, with the S&P 500 ending the week 0.1% down, the NASDAQ 0.2% up and the Dow Jones 0.5% up.

The tech heavy NASDAQ benefitted from a more positive week for tech firms and positive earnings reports for healthcare and consumer staples firms helped the industrial Dow Jones.

Trade talks with China continue, but with no substantial progress made and a shortened trading week, US markets were relatively muted. The USA are also due to commence new trade talks with both Japan and the European Union.

Asia

Asian markets ended the week up off the back of better than expected economic data from China. The FTSE All World Index – Asia Pacific was up by 0.3% across the week, the Hang Seng up by 0.2% and Japan’s Nikkei up 1%.

Economic growth in China was 6.4% in Q1 of 2019, slightly ahead of expectations. Although Chinese data is always treated with a dash of scepticism, their economy seems to be holding up better than expected through the current trade war with the US.

Bond Yields

The 10-Year Gilt yield was virtually flat throughout the week, ending Thursday 1 basis point down at 1.2%. Bond markets were fairly muted last week as concerns over a global slowdown continue. With equity markets fairly stable, there was not much investor appetite to de-risk away from bonds.

Europe

10-Year German Bund yields ended the week 3 basis points down at 0.3%. Continued concerns over economic strength in the Eurozone caused German Bund yields to fall back. Despite a good week for European equities, investors are still wary and continue to favour German government bonds.

US 10-Year Treasury yields ended the week 1 basis point down at 2.56%. With little movement in equity markets there was little to change investor appetite towards bonds. Positive earnings reports over the past month have seen bond yields rise, although this has stagnated over the past week.

Currency

GBP / USD – Current 1.2993 Previous 1.3074

GBP / EUR – Current 1.1554 Previous 1.1568

Sterling was largely unchanged against the Euro and fell by 0.6% against the Dollar. Brexit continues to be the main influence on Sterling and whilst economic and employment data shows some areas of the UK are fundamentally sound, until Brexit is resolved most analysts do not foresee any large gains for the Pound.

Commodities

Gold

The Gold spot price ended the week down 1.1% at $1,275 per ounce on Thursday.

With equity markets slightly up over the week, appetite for Gold reduced. In addition, with a 4 day weekend ahead, there was some suggestion that investors were profit banking.

Oil

Oil prices continued to rise slightly last week, with Brent Crude ending Thursday 0.6% up at $71.97 per barrel.

Although oil prices rose for another consecutive week, the rate of growth slowed as Russia is considering increasing production in order to fight the US for market share. OPEC continue to limit production in an effort to prop up prices, but are concerned that the US may increase production in order to increase their market share.