EUROPE

During this week European indices have on average soared by 1% . In particular, the German DAX30 started the trading week at 11’267 and closed around 11’460 and the French CAC40 opened at 5’160 and closed at 5’215, both increasing around 1.5%. Differently from core countries, the most important peripheral ones have raised below 1% during the week: the Spanish IBEX35, which started the trading week at 9’150, closed at 9’205 and the Italian FTSE MIB that floated the week around 20’250.

In the same period the spread between 10y Europeans bonds and the 10y Bund has raised: the spread of Italian 10y jumped to 278 basic points; the French one to 40.5 basic points, while the Spanish decreased from 110 to 107.

The most important facts of economic calendar have been the Tueasday’s announcement of December Italian Industrial New Order which decreased 5.3% (YoY) and Italian Industrial Sales reduced 7.3% (YoY) confirming the weak outlook of Italian economy. On Thursday have been published the German CPI which increased 1.4% (YoY), as in 2018, and the French CPI up 1.2% (YoY) which reduced from 1.7% in 2018.

Last but not least, after the closing of Friday trading session, the agency Fitch confirmed the Italian rating BBB with a negative outlook. This decision is extremely important for Italy because Italian Bonds with additional two downgrades would be rated as “junk bonds” and many foreign institutional investors would be forced to sell Italian sovereign bonds. Goldman Sachs has estimated that such two downgrades would cause a $100 billion selloff.

USA

This week American indices have raised around 1%. The Dow Jones started at 25’800 and closed at 26’050; the Nasdaq Composite opened at 7’470 and closed at 7’530 and the S&P 500 raised from 2’770 to 2’795. The indices have decreased until Wednesday, when Jerome Powell (chairman of the Fed) has transmitted confidence to the markets with a dovish speech about interest rates and slowdown in the balance sheet reduction. During the week, the USA economic calendar concerned less significant indices compared to Europe. The most important is the Manufacturing PMI that was at 53.7 on February, below than expected (54.9).

The AIE declared that the Weekly Crude Oil Stock increased of 1.260 million barrels compared to the expectation of a reduction of 998 million barrels. During the week the West Texas Intermediate Oil increased its value from 56.2$ to 57.1$ per barrel following the trend of the stock market. Over the same period, gold fluctuated around 1330$ with a peak on Wednesday around 1350$.

Lastly, during Thursday and Friday spread the notice about a continuance of USA-China Trade negotiations, probably the most important markets topic of the last months. This week trade talks have been held in Washington but the outcome is still unclear.

UK

A shocking news which came up this week was the decision by Honda to shut down its vehicles and engine-making plant in the UK, as a response of both Brexit fears and a slowdown in sales in the European area.

Furthermore, on Tuesday there was a lot of excitement for the first quarterly results of HSBC, Europe’s biggest bank, under the new CEO John Flint. Unfortunately, the bank’s revenues collapsed in December 2018 as a result of the sell-off of the market, with both revenues and earning below analysts’ consensus. The stock fell 4.4% on the day, after finishing 2018 with a -17% performance.

On the Brexit side, there were no major news last week. Because of this, many EU officials now expect Theresa May to ask for a 3-months extention for the day of UK’s exit from the European Union. The talks between EU negotiator Michel Barnier and UK officials have not managed yet to produce a solution to the backstop issue.

The biggest losers came as well from the Energy sector, lead by Centrica Plc which was down almost 12% on Thursday. Mining giant Glencore closed the week at 309 (+3% on Friday) with weekly gains of 1.64%. Defense company BAE experienced hard losses of 11% w-o-w amid news that Germany’s ban on selling weapons to Saudi Arabia will prove to be very difficult. The GBP strengthened against the euro and the dollar to close at 0.868€ on Friday from 0.876€ last week, and at 0.765$ from 0.777$ last week, while the FTSE100 lost around 0.9%

REST OF THE WORLD                  

On Tuesday, Michael Calvey, the founder of Moscow-based private equity Baring Vostok, was arrested in Russia. This sparked massive fears among foreign investors involved in Russian equities and led equitues to decrease by 0.8% over the week. The USDRUB decreased, on the contrary, to 65.37 from last week’s 66.29.

On Thursday, the news that the Chinese port of Dalian banned all coal imports ramped up fears among commodities-exporting countries. The Australian Dollar lost 0.86% on the day. This was also seen as a retaliation against the Australian decision of banning Huawei from its domestic market.

On the US-China trade talks side, the two parties have agreed to a two-days extension, among optimism both by Mr. Xi and Mr. Trump. This led positive sentiment towards China, with the offshore renmimbi increasing by 0.89% with the Shanghai Composite up 4.5% and the Hang Seng up 3.3% over the week.

Japanese equities managed to rally almost 2.5% last week thanks to the the positive market sentiment in spite of weak economic data: exports fell 8.4% YoY and the manufacturing PMI fell to 48.5, below the 50 threshold. The yen depreciated by 0.2% against the USD to 110.7.

Categories: Markets

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