With trading relatively quiet, European markets were flat overall. However, emerging countries rose by close to 1% and US markets actually hit fresh highs.
After a month of strong performance from global equities, the MSCI World in local currency had its worst down week since Donald Trump’s election.
Equity markets edged lower on profit taking after Emmanuel Macron’s victory in the French presidential elections.
For many markets it was a short holiday week but there was lots of news.
The week got off to a very buoyant start. The French presidential first round results sent eurozone systemic risk lower. And the other good news came from indications that economic momentum in the zone was still improving.
The most professional polls on the French presidential election outcome are suggesting a number of possible combinations for the second round play-off. And naturally, volatility has resurfaced on markets.
Equity markets marked a pause in a short Easter-week with most stock markets closed for Good Friday. And yet behind the calm facade, equity volatility rose as investors sought to hedge positions against a possible drop.
Equity and bond markets edged higher over the week. The big news items were the Fed’s minutes and Mario Draghi’s statements. The Fed suggested that it might no longer reinvest coupon payments if the US economy continued to pick up speed.
There was no improvement in market visibility this week. In the US, relations between the Trump administration and Congress are turning out to be quite complicated. The bill to replace Obamacare had to be withdrawn after the Republican Party’s right wing criticised it for not being bold enough.
Equity market trading was more nervous with the US and Japan losing ground and Europe and emerging markets treading water. Worries over Donald Trump’s electoral promises surfaced after the new administration struggled to pass its new Healthcare bill.
Equity markets rose for the second week in a row with Europe and some emerging markets leading the trend.
All eyes were on the ECB’s monetary committee meeting last Thursday and on the looming FOMC meeting on March 14/15. Last week, Janet Yellen’s comments reinforced investor expectations that rates would rise next week.
It was a good week for equity markets, especially in Europe which had been drifting lower for weeks. The global economic environment and earnings outlook remained encouragingly upbeat.
As investors kept a close eye on shifts in European political risk, especially in France, economic data confirmed that the outlook for growth and inflation was on an uptrend.
Europe will continue to enjoy economic growth judging from the European Commission’s decision to raise its forecasts. And with the Philly Fed index back to a 1984 high, momentum is also strong in the US. Growth drivers are still US consumers - retail sales rose again - and the reinforcement of the reflationary trade.
In spite of reassuring macro data on Germany’s industrial orders, surveys on French sentiment and US activity as well as rather solid company results, equity markets continued to hesitate over the elements in Donald Trump's programme relating to protectionism, fiscal stimulus and deregulation.
Markets were generally directionless over the week. Economic data and surveys, like the rebound in January’s ISM to 56, showed that the global economic recovery was still in place.
Donald Trump’s inauguration speech was in similar vein to his electoral campaign. His initial decrees will press for reduced regulation and higher infrastructure spending (Obamacare reform, rekindling of the USA-Canada pipeline project) but also more protectionism via the construction of a wall with Mexico and the...
Markets have flat-lined since the middle of December, bonds markets have calmed down and the US dollar has lost 2%. Investors have partly discounted any economic and earnings momentum from Donald Trump’s measures, notably lower corporation tax and reduced levies on capital repatriation.