Markets and key events | 15th March 2019

A positive week for equity markets

It has been a strong week for equity markets, buoyed by a combination of company merger activity, weak US inflation data lessening concerns over US rates, rising confidence that the UK can avoid a messy divorce with the EU and on Friday, news that China has passed a new foreign investment law intended to smooth the way to a trade deal with the US.

The US S&P 500, having last week suffered its biggest drop in three months, rose 2.4% for the week as of 12pm London time on Friday.  Similarly, the technology focused Nasdaq index rose 3.0%, benefitting from a rally in semiconductor companies after Nvidia agreed to buy Israeli chipmaker Mellanox Technologies.  The EuroStoxx 600 rose 2.5%, supported by UK parliament ruling out a no-deal departure from the EU, following Theresa May’s amended Brexit deal being voted down at the second attempt.  The UK’s FTSE All Share index rose 1.7% in a week of twists and turns for Sterling, which has traded between $1.296 and $1.338.  The more domestically focused FTSE 250 index rose 2.2%.  The Japanese Topix rose 1.9%, Emerging Markets rose 1.75%, whilst the Australian S&P/ASX 200 fell 0.46% against a background of weak economic sentiment.

Against the enthusiasm for stocks, US Treasuries were broadly flat, with the 10-year trading at 2.63% on Friday. German bunds sold off a little, now trading with a yield of 0.10%, and similarly, UK gilts sold off a little, currently yielding 1.23%.  Gold managed to make some headway over the week, climbing 0.25% to trade at $1,303 an ounce.

Weak US inflation buoys investors

US equities had a strong week, despite airline manufacturer Boeing falling over 11% over the week, after one of the company’s 737 Max 8 jet planes operated by Ethiopian Airlines crashed on Sunday.  However, investors were buoyed by the latest US inflation print, which showed consumer prices rising in February at their slowest pace in two and half years, raising hopes that the US Federal Reserve may keep interest rates lower for longer.  The S&P 500 hit its highest point for 2019 on Wednesday, helped by energy stocks as oil prices rose to a four-month high.  Brent crude is currently trading at $67 a barrel and WTI (West Texas Intermediate) is trading at $58.6 as oil traders bet on a tighter oil market, due to supply curbs from OPEC (Organisation of the Petroleum Exporting Countries) and US sanctions on Venezuela and Iran.

Chinese equities rise despite industrial output growth falling to a 17-year low

Despite reports that a meeting between the presidents of China and US to resolve the trade war has been pushed back to April, and Chinese industrial output growth fell to its lowest level in seventeen-years, Chinese equities rose.  The Shanghai Composite rose 1.8% and the Hong Kong Hang Seng climbed 2.8%, as investors focused on efforts to stimulate the economy and news that Beijing has passed a new foreign investment law designed to ease trade talks with the US.

Australian equities head lower led by the banks

It was a mixed week of trading for the Australian stock market, which ultimately ended slightly lower, led downwards by the” big four banks”, in particular ANZ which fell 2.8% for the week, after the bank faced a broker downgrade citing revenue pressure. Elsewhere the Australian dollar weakened as much as 0.5% midweek to $70.47¢, on news that consumer sentiment has dropped to its lowest since September 2017. The Melbourne Institute and Westpac Bank index of consumer sentiment fell 4.8% to a reading of 98.8, with readings below 100 indicating more pessimists than optimists. This data comes after last week’s lower than expected GDP growth.

The information provided above is for Professional Advisers: All data has been sourced from Lipper. Any investment must be made in conjunction with reading the relevant KIID or Investment Mandate. Clients should be aware that the value of investments and the income from the may fall as well as rise and they may not get back the amount originally invested. Investors should note that the views expressed and information given were current at the time of publication but may no longer be so and/or may have been acted upon by the Investment Manager already. Source SmartIM