Global Markets Update Monday 16 April 2018

Posted on 16 Apr 2018

Global stockmarkets edged higher as trade tensions between the US and China appeared to ease. However, after markets closed on Friday night, the US, Britain and France launched air strikes against Syria as civilians were harmed by an alleged chemical weapon attack.

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United Kingdom

The FTSE 100 rose 1.1% over the week.

UK manufacturing output unexpectedly fell 0.2% in February - the first decline in almost a year and down from revised growth of zero for January.

US

The S&P 500 gained 2.2% over the week.

Minutes of the Federal Reserve’s March rate-setting meeting indicated policymakers think “some further firming” in rates will be needed as they have become more optimistic that inflation is on track to hit the Fed’s target.

Core consumer prices rose 2.1% year-on-year in March. This is above the Fed’s target and the highest rate in a year.

Core producer prices rose 0.3% in March, taking the annual rate up to a seven-year high of 2.7%.

President Trump ordered his top economic advisers to re-examine the case for membership of the Trans Pacific Partnership – pulling out of the TPP was one of the first acts of his presidency.

In the first quarter of this year, JPMorgan Chase recorded the biggest ever quarterly profit by a US bank, boosted by higher trading volumes, lower loan losses and a big cut in the corporate tax rate. Citigroup also reported higher earnings.

Europe

The Eurofirst 300 rose 1.2% over the week.

Eurozone industrial production fell 0.8% in February, the third straight monthly of declines. While industrial production is still up 2.9% higher than February 2017, the rate of growth has slowed from 3.7% in January and 5.2% in December 2017.

Eurozone investor sentiment dropped for the third month in a row, due to worries about deteriorating relations between the US and China. The Sentix eurozone index dropped to 19.6 in April, from 24 the previous month and 32.9 at the start of this year.

German exports dropped 3.2 per cent in February, the biggest monthly drop since August 2015.

Novartis offered to buy AveXis, a US specialist in spinal muscular atrophy, for $8.7bn.

Japan

The Nikkei 225 rose 1.0% over the week.

Japanese core machinery orders rose 2.1% month on month in February. While that was higher than analysts’ estimates, it was markedly lower than the 8.2% growth recorded in January.

Pacific Basin

China posted its first trade deficit in more than a year in March. Exports fell 2.7% year on year in March, compared to expectations of a 10% increase, while imports rose a higher than expected 14.4%.

China’s official consumer price index rose 2.1% in March. That was below a median forecast of 2.6% and reflected a sizeable slowdown from the four-year high rate of 2.9% in February.

Singapore’s GDP rose 4.3% in the first quarter of the year as manufacturing picked up sharply.

Emerging Markets

Russian stocks fell 4.5% over the week due to the impact of new US sanctions and fears over increased conflict in Syria.

Brazil’s inflation continued to slow, hitting 2.68% in the 12 months through the end of March. This is the country’s lowest annualised inflation rate since the mid-1990s.

Turkish stocks fell 4.2% over the week. President Recep Tayyip Erdogan reiterated his calls for interest rate cuts despite a seemingly overheating economy.

Bonds

The yield on the two-year Treasury note rose 9 basis points over the course of the week, closing at 2.36%. Meanwhile, 10-year yields closed at 2.82%, causing the yield spread between the two- and ten-year bonds fell to 46bps, its lowest level since 2007.

Moody’s raised Spain’s long-term credit rating, citing improved economic growth and banking sector fundamentals which outweighed political risks.

Commodities

Oil prices climbed back towards four-year highs, with Brent crude rising above $73 a barrel, amid intensifying worries about Middle East supply disruptions.

Aluminium prices climbed to a three-month high after the two largest global metals exchanges said they would no longer accept metal from sanctioned Russian producer Rusal.