[edmc id= 3846]Download here the Weekly Market Brief[/edmc]
Microsoft and Alphabet weighed heavily on the major US stock indices Friday when the two stocks fell 7.3% and 5.1% respectively following disappointing earnings reports published late Thursday. On Tuesday, the S&P 500 broke 2,100 for the first time since December, closing at 2,100.80, before falling back to 2,091.58 by market close Friday, constituting a 0.61% increase for the week. The Dow Jones Industrial Average rose 0.63% over the same period to a level of 18,003.75.
The VIX index finished the week at 13.22, decreasing 11.10% during the week.
The yield on 2 year and 10 year US treasury bonds traded, respectively, 10bp and 16bp higher at 0.82% and 1.89%
Following the failure of the meeting in Doha to curb oil production, oil prices fell sharply on Monday morning. However, prices recovered over the week, reaching 43.86 (WTI) on Friday. This has been partially attributed to improving economic conditions such as rising European consumer confidence.
Uncertainty surrounding the Brexit dominated UK markets once again this week as it was reported that the first three months of 2016 saw the country’s weakest private housing growth in nearly three years whilst investment in central London office buildings was seen to drop 52% quarter on quarter. Bank of England Governor Mark Carney publicly attributed the decline in foreign investment in commercial real estate to Brexit-linked uncertainty. Furthermore, data released on Wednesday showed that UK unemployment rose for the first time in almost a year during the three months to February. This came in the form of a 21,000 increase in the number of jobless between November and February.
On Wednesday the FTSE 100 closed at a 4-month high of 6,412.24, up 1.05% from week-start. This rise was partially driven by the strong performance of mining stocks such as Anglo American, Antofagasta and Glencore which surged on the back of positive Chinese economic signals. However, these gains eroded and the FTSE 100 ended the week at 6,310.40, down 0.53% from week-start.
The EUR/GBP exchange rate fell slightly over the week from 0.79 to 0.78, whilst the USD/GBP exchange rate fell from 0.70 to 0.69.
As expected by the markets, the decision by the European Central bankers was to keep the interest rates unchanged at the current levels. This decision was due to the fact that long term Eurozone inflation projections remain well anchored near the European Central Bank´s target, but GDP growth this year will be weaker than earlier thought. Currently expected inflation for 2018 is about 1.6% and is expected to increase to about 1.8% by 2020, the survey of 53 forecasters showed. Therefore the EUR/USD exchange rate showed only a small decrease of 0.53 percent from 1.1284 to 1.1224.
Moreover, Draghi said on Thursday that the ECB expects the economic recovery to continue although global risks and a low pace of reform by governments within the Eurozone may put some pressure on the economy. He justified his view by pointing out better financing conditions in the euro area caused by the monetary policy stimulus. Additionally, the Eurozone consumer confidence improved more than expected in April to end three months of decline. The Commission said consumer morale rose by 0.4 points to -9.3.
The EURO STOXX 50 continued its recovery this week and hiked by about 3% mostly driven by a recovery in the banking sector and the car industry.
Rest of the World
This week the Chinese cabinet said that China will take steps to boost exports, including encouraging banks to boost lending, expanding export credit insurance and raise tax rebates for some firms. In particular, banks will be encouraged to lend to profitable trading companies that have received overseas orders and tax rebates for exporters of some machinery products will be increased. On Wednesday, hedge fund manager George Soros once again spoke very critically about an over-reliance on lending to boost China´s economy adding that the current situation in China is very similar to what happened during the financial crisis in the US, which was also fuelled by credit growth. Therefore the Shanghai Composite was one of a few major indices performing negatively this week. It decreased from a level of 3,074.12 by 4.7 percent to 2,933.03.
In Japan the Nikkei climbed to a 12 week high after the USD increased to about 110 Yen for the first time in one month. In particular the Nikkei rose by about 4 percent to 17,572.49.
[edmc id= 3828]Download as PDF[/edmc]