Markets & Key Events

27th April 2018

Corporate earnings alarm and reassure

It has been a mixed week for stock markets, as rising US (United States) Treasury yields combined with corporate earnings results that both alarmed and reassured investors.  As of 12pm London time, the US Standard & Poor’s 500 index fell 0.1% over the week, the technology focused Nasdaq Composite fell 0.4%, MSCI Emerging Markets were down 2.05%, whilst the Japanese Topix index rose 1.5%, EuroStoxx 50 index rose 0.7%, FTSE All Share rose 1.2% and the Australian S&P/ASX 200 index rose 1.5%.  10-year US Treasuries lost 0.3%, however 10-year UK Gilts rose 0.1%, as did 10-year German Bunds. The US dollar index rose 1.6% and Gold fell 1.4%, now trading at $1,320 an ounce.

US Treasury yield rises above 3%

The US Standard & Poor’s 500 index fell 1.3% on Tuesday as rising earnings from Alphabet, Google’s parent company, and Caterpillar, an industrial bellwether, were overlooked, with investors instead focused on signs of margin pressure and rising costs.  This coincided with the 10-year US Treasury yield briefly rising above 3% for the first time in more than four years.  Positive results later in the week, notably from Facebook, with the company’s net income rising by 63% year-on-year in the for the first quarter of the year, helped propel markets upwards again towards the end of the week.  On Friday, first quarter GDP came in at 2.3%, ahead of consensus expectations.

Brent crude $75

Brent crude oil rose as high as $75.47 after President Trump described the Iran nuclear deal as “insane”, raising the prospect of sanctions being placed on Iran once more, including the exporting of oil.

Eurozone growth rolling over

The German Ifo Business Climate survey, a leading indicator for economic activity in Germany fell for the fifth month in a row, indicating a slowdown in the recovery, but not a contraction.  Whether this is due to the ‘Beast from the East’ winter blizzard or something more fundamental, remains to be seen. But the moderating Eurozone recovery led the ECB (European Central Bank) to remain cautious, announcing no changes to monetary policy.  The euro is now trading at $1.21 to the dollar, off its highs of $1.25 reached in February.

Sterling under pressure

The UK’s first quarter GDP growth, which was forecast to be weak, came in much worse at just 0.1%, the weakest quarter since 2012.  This has put serious doubts over an interest rate rise in May and Sterling is under pressure, now trading as low as $1.38 to the US dollar.

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