Market Commentary

Posted by melaniebond

Equity Indices

With less volatility present compared to the previous week, the FTSE 100 experienced a positive period and finished the week up by approximately 1%. With some disappointing earnings results published during the week, the rise in the FTSE 100 appears to have been driven by a weaker sterling.

Europe

The broad gauge for European equities, the FTSE All World Index – Europe ex UK, experienced a volatile week amid further trade war rhetoric and finished the week up by around 0.4%. The index was boosted by positive corporate earnings results across Europe. The German DAX index experienced a rally during the early part of the week, up approximately 1.6% by Wednesday, but this was quickly reversed with the index ending the week flat. The DAX continues to be highly sensitive to global trade uncertainty and President Trump’s comments regarding imposing tariffs on all of China’s $500 billion exports to the US seemingly had a negative impact.

Looking to the US, the S&P 500 index finished the week up around 0.1% after a brief rally during the early part of the week was reversed. Expectations of earnings results for the second quarter of the year continue to be positive, with analysts expecting overall earnings for S&P 500 companies to be up by around 20% on the previous year, however, this is seemingly already priced into the market with the earnings results published during the week having no significant impact on the index. News of President Trump stating he is unhappy with the prospect of further interest rate rises by the Federal Reserve seemed to have little impact on equity markets.

Asia

The Broad Asia Pacific Equities gauge, the FTSE All World Index – Asia Pacific, rallied during the latter part of the week after a subdued start, with the index finishing the week up by almost 0.7%. This was in contrast to many global equity markets which had a stronger start to the week with falls during Thursday and Friday.

Bond Yields

The Inflation data for June 2018 released during the week was weaker than expected, which prompted the markets to price in a lower probability of the Bank of England raising interest rates next month. Whilst a rate rise is still likely, there is now less data to support this decision and so 10 year government bond yields fell across the week.

Europe

Early in the week, German Bund yields fell before recovering to finish the week largely unchanged from the start of the week. The International Monetary Fund (IMF) said during the week that Eurozone growth has peaked and risks to the outlook are mounting, however, they also noted that there is room for the current economic expansion to continue.

In the US, government bond yields remained relatively stable despite President Trump stating he was unhappy with interest rates going up, with a slight rise in 10 year Treasury yields across the week.

Currency

GBP / USD – Current 1.3123 Previous 1.3235
GBP / EUR – Current 1.1201 Previous 1.1326

Over the past week, Sterling continued to weaken against the US Dollar and the rise against the Euro experienced during the previous week was reversed. Concerns regarding the stability of the UK government and the narrow passing of amendments to the Government’s Brexit White Paper prompted falls in the pound. The US Dollar continued to strengthen during the week, leaving the pound at a 10 month low against USD.

Commodities

Gold

The spot price of gold per ounce was around $1,230 at the end of Friday having fallen by around 1% across the week.

Oil

The spot price of Brent Crude rose slightly during the week and was around $73 per barrel by Friday. Oil prices remain high amid tensions regarding production in the Middle East, although it has fallen back slightly from the $79 per barrel seen at the beginning of July.

Portfolios

Amid less volatility in equity markets, all of the Growth portfolios from Score 2 to Score 6 saw positive returns, with the Score 4 strategy achieving a return of 0.78% for the week. Score 2, along with the higher risk portfolios in Score 5 and Score 6, all outperformed their respective benchmarks. Score 3 and Score 4 were outperformed by the benchmark by around 0.04% and 0.03% respectively. The Super Cautious portfolio was resilient and delivered a positive return of 0.21% across the week. The Ethical and Ethically biased portfolios also delivered positive performance and, in line with the non-ethical growth portfolios, most of them outperformed their benchmarks. The Lite portfolios saw another week of good performance, with all of them beating their benchmarks.