Investors wait for the Jackson Hole Symposium
The US Commerce Department’s lift to markets at the beginning of the week soon fizzled out.
Markets struggled to regain their calm although the risk of Chinese currency manipulation abated.
In the last 6 trading sessions, equity markets have fallen sharply with the S&P 500 and the Eurostoxx 50 down by about 6%. Yields on core government bonds have plunged, down 30bp for 10-year US Treasuries and 15bp for the German Bund which is now yielding minus 0.52%
It was a difficult week on equity markets although investors should have been reassured by the Fed which cut its rates by 0.25%. Instead, they were thrown off balance by Jerome Powell’s accompanying comments which failed to provide a clear endorsement of a series of cuts in the months ahead.
Central banks once again remained centre stage. Judging from falls in the euro and European sovereign bond yields, investors were clearly expecting big developments over the week. And yet the ECB meeting raised more questions than answers.
Unconvincing results and fresh US-China tensions leave investors hesitant.
Markets are still strongly influenced by central bank announcements. Jerome Powell’s statement this week at the House of Representatives was eagerly anticipated. He stressed the confirmation that uncertainties regarding global trade and the strength of economic growth were still in evidence, against a backdrop of a...
Global growth is slowing smoothly but the week’s PMI and ISM data revealed some resilience in developed countries thanks to buoyant consumption and services.
Pre-G20 summit stress kept markets on tenterhooks throughout the week, leading global indices to trade within narrow limits. The weekend’s summit will be decisive.
Mario Draghi at the ECB once again said the bank had a number of tools it could use to boost inflation and the economy as worries over the outlook sent long and short eurozone sovereign bond rates even lower.
Risk assets gained further ground but trod more cautiously than in the preceding week. This is only natural as the FOMC is on June 18/19 and the G20 will take place at the end of the month. Both events will be decisive for market trends in the coming months.
The week kicked off with an increasing amount of disappointing economic data, particularly in China, prolonging concerns over growth and driving investors’ risk aversion sharply higher.
Trade war uncertainties continued while the latest advanced indicators delivered increasingly contradictory signals.
The US trade dispute continued to worry markets and US and German companies.
In a week full of twists and turns, US-China trade talks turned complicated. Donald Trump is now expected to postpone the introduction of tariffs on European car and spare part imports to the US.
Volatility rebounded from lows after Donald Trump threatened to raise tariffs on certain Chinese imports from 10% to 25% from Friday May 10 if trade talks failed make substantial progress. He followed through on this threat even though China’s vice premier Liu He was in the US to continue discussions.
A shortened week got off to a positive start with S&P maintaining Italy at BBB with a negative outlook. Spain's elections saw the Socialist party come out on top with more seats than previously but still no absolute majority. As a result, spreads tightened between peripheral countries and Germany.
There were no clear indications on market trends this week, a reflection of the difficulty investors are having in distinguishing between good and bad macro and company news.
US markets pushed inexorably towards all-time highs, leaving the S&P500 only 40 points off its September 2018 peak. However, trading was still thin, especially for the beginning of the quarterly earnings season.