During the trading week S&P500 and Nasdaq have increased their market value while the Dow Jones 30 has been quite steady. The S&P500 has closed the week at 2940, increasing by 1%, while the Nasdaq, in the same period, moved from 7980 to 8148, rising by 2.1%. The Dow Jones has been steady around the 26500 level.
The main economic event of the trading week has been the 1st quarter US GDP growth: in the first three months of 2019, the GDP has risen by 3.2%, beating widely analysts’ expectations. The publication has turned on the enthusiasm of investors that started buying stocks. The export has been the principal incentive to GDP growth, rising around 3.7%, while import reduced and the net export contributed to GDP growth by 1.03%.
Furthermore, on Tuesday the EIA published data regarding oil production: inventories increased by 5.5 million barrels against forecasts of a reduction of 1.2 million barrels. The WTI closed the week 1.21% lower at 62.84 posting a correction after the broad rally which started in January prompted by a weaker dollar and geopolitical tensions between USA and Iran.
US 10year Treasuries closed the week with a yield of 2.5%, down from previous week’s 2.56%, with 3-months T Bills yielding 2.42%, thus ending the week broadly flat but not inverted. The dollar gained 0.74% against the euro with the EURUSD now at 1.12, while the Dollar Index increased by 0.67% over the week.
Despite rallying to a 6-month high on Tuesday the FTSE 100 was 0.08% down at 7,428.19 on Friday, with a weekly fall of 0.43%. Tuesday was the first chance after Easter Monday for the investors to react to the surge in crude oil prices for the commodity-heavy index. The appreciation in the dollar has sent the GBP/USD rate to the $1.29 handle – its lowest level since February. The 10-year Gilt yield was at 1.14%, falling for 1 bsp. Volatility has also dropped with the GBP Volatility BPVIX falling for 6.98% to 6.80 but not back to the 5.50, it saw at the beginning of the week, as the political drama turns to deadlock with Theresa May preparing to admit she is unable to get her Brexit deal through Parliament in time to avoid the European elections.
Royal Bank of Scotland saw its shares drop 3.4% after the announcement that the bank’s CEO was stepping down. Sainsbury’s shares also lost after the UK competition regulator halted its takeover of rival Asda. Sainsbury’s shares fell almost 5% following the news on Thursday, having recovered 2% on Friday, making their yearly drop to nearly 20%, the lowest level since the 2016 EU referendum.
Next week, the Bank of England will release its rate decision and the inflation report. This will shed a light on the bank’s option on the recent decision to delay Brexit, rising inflation and weakening currency.
Strong earnings helped the European markets finish higher on Friday as they helped cut losses from earlier in the season. The DAX rose 0.27% to 12,315.18. The DAX is surprisingly trading higher despite a drop in Deutsche Bank a day after the merger talks with Commerzbank fell apart. The CAC 40 was 0.21% higher at 5,569.36. The Pan-European STOXX 600 closed up 0.22% at 391.01. In April the index has gained over 3%, very likely extending gains to a fourth straight month. The STOXX 50 has outpaced the broader index with a gain of 3.1% in April and finished up 0.24% on Friday at 3,500.41. The Euro was off 1% for the week as the Eurozone economic figures continued to disappoint. It hit a 23-month low on Thursday at $1.1112. On Friday, the shared currency was slightly higher at $1.115. Germany’s 10-year bond yield fell one basis point to -0.02 per cent.
European Central Bank Vice-President Luis de Guindos on Thursday opened the door to more money-printing if needed to boost inflation in the eurozone.
The Swedish Krona fell 1% on Thursday, its worst day against the euro since November 2017, after the central bank delayed the plan to raise its benchmark interest rate. The main rate is currently at -0.25%.
Uncertainty is brewing in Spain over the outcome of the general election, which will be taking place on April 28. On Friday, the 10-year bond yield dropped to 1.03% by six bps.
The Italian 10-year bond yield was also down as clashes within the governing coalition emerged ahead of the next month’s European Parliament elections. The yield was at 2.58%, down from the seven-week highs hit on Tuesday at 2.70% and set for its biggest daily fall in seven weeks. S&P Global Ratings said on Friday it had affirmed Italy’s BBB credit rating while holding a negative outlook on the country.
Last week has been particularly bad on the Chinese side: all major indices have closed in the negative territory. The SZSE has been the worst-performer with a weekly loss of 5.9% closing at 9780. The Shanghai Composite has posted losses for 5.8% to 3078 level. This correction comes after the Chinese equity market has posted over 30% gain since the beginning of 2019 thanks to a weakening dollar and the extraordinary stimulus measures adopted by the Chinese central government. The previous week’s GDP growth of 6.4%, better than many expected, sparked fears that the government might ease its stimulus in the short term and caused the equity market correction. The yuan devalued by 0.39% against the dollar with the USDCNY exchange rate at 6.73.
Samsung has announced this week that it expects its operating profits to decrease by 60% in the first quarter due to declining prices in memory chips, coupled with bad news from POSCO which posted a 19% decline in operating profits. The Korean equity index KOSPI was down 1.66% over the week.
On the Russian side, the slide in the oil price led the ruble to depreciate by 1.50% against the dollar to 63.8 rubles per dollar. The MOEX index, after a good start of the week, lost 0.92% after Wednesday’s oil news.
In Japan, the NIKKEI index posted the fourth week of gains (+0.26% in the last 5 days) closing the week at 22,258 points, ahead of a 10 days shutdown of the market due to the upcoming enthronement of Crown Prince Naruhito. Strong Chinese data were key to influencing the investor sentiment towards the country, and many professionals now think that the worst has passed for tech stocks as the sales should have bottomed around January and February. The 10year Japanese bond yield stood at -0.035% as of Friday, while the yen closed 0.3% lower against the dollar with the USDJPY at 111.58.