Market Commentary 29th April 2019 from Charlie Hancock

Posted by melaniebond
Market Commentary 29th April 2019
Equity Indices
The FTSE 100 index fell by 1.26% across the week as equity markets around the globe posted mixed performance. The index was hampered by weakness in the banking, oil and mining sectors, together with downbeat earnings results across the board.

Royal Bank of Scotland (RBS) saw their share price decline by around 8.5% across the week after reporting reduced profits for the first quarter of 2019, with the wider banking sector impacted as a result. Glencore PLC announced that the US Commodity Futures Trading Commission is investigating them for possible corrupt practices. The commodity giant’s share price subsequently fell by around 7%, which dragged down the wider mining sector. The oil sector was also a key detractor for the index this week amidst a falling oil price. Shell and BP saw notable falls on Friday after US based rival, Exxon Mobil, reported a 49% fall in quarterly profits.

European equity markets saw mixed performance this week, with the broad FTSE All World Index – Europe ex UK declining by 0.4% across the week. The main stock market indices for France, Spain and Italy all declined, with Germany’s export driven DAX index rising by 0.65%.

The weakness in oil and commodity stocks seen elsewhere across the globe fed through to European stocks in these sectors. The German based European banking giant, Deutsche Bank, reported a fall in revenue for the first quarter on Friday. Coupled with the bad news regarding RBS, the wider banking sector across the region suffered, despite some positive results being posted. Stocks in the healthcare and auto sectors were broadly positive for the week, aided by a weaker Euro, given the international exposure of companies operating in these sectors.

The S&P 500 index rose by around 1.1% across the week, touching a new all-time high. US equities rallied on Friday after US GDP growth figures for the first quarter of 2019 were released. The annualised growth rate of 3.2% beat expectations by some margin, lifting investor sentiment.

Stocks were also driven upwards by resilient first quarter earnings results released during the week, with Healthcare being the best performing sector. A weaker oil price, together with a sharp fall in profits reported by Exxon Mobil, resulted in notable weakness in the Energy sector. The consumer discretionary sector gained after Amazon reported increased profits for the first quarter of the year. The results were significantly higher than analyst expectations, which boosted sentiment across the wider sector.

Asian equities suffered this week, with the FTSE All World Index – Asia Pacific falling by around 0.5%. A strengthening US Dollar appeared to hurt the region, with surprisingly poor GDP growth figures for South Korea also weighing on investor sentiment in the region. Japan’s Nikkei 225 index rose by around 0.6% across the week.

Chinese stocks fell on Friday to post their biggest weekly decline for 6 months. Investor sentiment for the region turned negative amidst speculation that the Chinese government may scale back on stimulus measures. Nothing was confirmed by officials in Beijing, however, some speculated that further stimulus may be limited as a result of signs that the economy is stabilising.

Bond Yields
10-Year Gilt yields declined this week from 1.20% to around 1.14% on Friday. Yields were pushed downwards throughout the week after investors sought the security of government debt amidst falling equity markets in most regions across the globe.
10-Year German Bund yields returned to negative territory this week, with yields declining from 0.03% to around -0.02% on Friday. Despite positive performance in the German stock market, weakness in other European equity markets resulted in investors seeking the safe haven of German Bunds.
US 10-Year Treasury yields declined slightly this week from 2.56% to around 2.50%. Despite US GDP growth surprising to the upside, soft inflation data for the US lead to a decline in yields. Recent movements in US treasury yields suggest that investors are expecting the Federal Reserve to make no changes to interest rates at the upcoming committee meeting this week.
GBP / USD – Current 1.2916 Previous 1.2993

GBP / EUR – Current 1.1588 Previous 1.1554

Sterling fell by around 0.6% across the US Dollar this week, whilst rising by around 0.3% against the Euro. In the absence of any significant news regarding Brexit to prompt changes in Sterling, the movements were largely driven by the US dollar strengthening and the Euro weakening against other major currencies.

The gold spot price rose by around 0.8% across the week to $1,276 per ounce. This rise came despite strong US GDP figures and a strengthening US Dollar, with these factors typically causing gold prices to fall.
The Brent crude oil price declined this week, falling by around 2.6% to $72 per barrel. The most significant move in prices this week came after US President Trump put further pressure on oil producing group OPEC to raise production in order to lower wholesale oil prices.