Weekly Market Overview - 14/09/2018

United States

- U.S. stock markets rose last week on renewed optimism over the U.S.-China trade conflict after the U.S. offered to hold a new round of talks. The Dow Jones Industrial Average rose 0.03% on Friday, with the index up 0.92% for the week to close at 26,154.67. The S&P 500 also rose 0.03% on Friday and 1.16% on the week to end at 2,904.98. The Nasdaq fell 0.05% on Friday but still gained 1.36% on the week to 8,010.04.

- The yield on benchmark 10-year U.S. Treasuries rose to 2.9959% at the end of last week from 2.9388% at the previous week’s close, as continued trade tensions.

- US Treasury Secretary Steven Mnuchin offered to hold trade talks with China before tariffs on an additional $200 billion in Chinese imports were imposed. The Chinese welcomed the offer. However, analysts were doubtful the two sides are ready to compromise and end the trade war that started July 6. However, US President Donald Trump cast doubt on the talks, saying US feels “no pressure to make a deal.” And media report late Friday said that Trump instructed officials to proceed with the new round of tariffs despite the new talks.
- Apple unveiled a new range of products, including a yet-more-expensive iPhone XS Max, which will retail for $1,099, and a new higher-priced watch. Apple is betting that its fan will continue to pay its products at the higher prices, supporting overall revenues.

- JP Morgan chief executive Jamie Dimon turned over to his two top deputies much the responsibility for running day-today operations of the bank. Analysts said it was a clear sign he would step down when his contract ends in five years.

- Walmart said it will buy Latin-American grocery delivery firm Cornershop for $225 million. The acquisition was the company’s latest move into the e-commerce space and away from bricks-and-mortar stores.

 

United Kingdom

- London stocks rose last week on easing global trade tensions and optimism on Brexit after Bank of English Governor Mark Carney agreed to say on during the transition. The FTSE 100 rose 0.31% on Friday and 0.36% on the week to finish at 7,304.04.

- The yield on 10-year Gilts rose to .15300% at the end of last week from 1.4590% the previous week on concerns over continued concerns on trade and Brexit.

- Bank of England Governor Mark Carney said the monetary policy response to Brexit would not be automatic but would depend on how the UK's departure from the EU impacted the balance between supply and demand as well as the exchange rate

- The BOE is well prepared for all Brexit scenarios and while the MPC will do what it can to support jobs and growth "the appropriate policy response is not automatic and will depend on the balance of the effects on demand, supply, and the exchange rate," Carney said. Brexit continues to overshadow the economic outlook near-term.

- Retail giant John Lewis reported Thursday that its first half profits fell 99% due to sharp discounting in the sector and competition on e-commerce. Profits fell to 1.2 million pounds, even as sales grew 1.6% to 5.5 billion pounds, as the company invested heavily in technology, staff and new product lines to keep up with the competition.

 


Europe (ex UK)

- European stocks rose last week on concerns about easing global trade tensions. The Eurofirst 300 rose 0.38% on Friday and 1.17% on the week to end at 1,477.83.

- The yield on benchmark 10-year Bunds rose to 0.4500% last week from 0.3870% last week at the previous week’s final bell on continued trade concerns.

- The European Central Bank reaffirmed Thursday its rate guidance and plans to wind down its asset purchase program, but stressed downside risks from protectionism and emerging markets. Eurozone growth remains "broad-based," President Mario Draghi said, adding that the latest data supported predictions for gradually rising inflation, despite a "slight" downward revision in the medium-term growth forecast in September's ECB staff projections.

- The 10-basis-point cuts in the growth outlooks for 2019 and 2020 -- to 1.9% and 2.0% -- were "mainly due to a somewhat weaker contribution from foreign demand," Draghi told a press conference. "Uncertainties relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility have gained more prominence recently," he said. As expected the ECB will halve its asset purchases to EUR15 billion a month from October, but it left itself some room for maneuver by stating that the final decision to end quantitative easing in December remained contingent on incoming data confirming the medium-term inflation outlook. Guidance for rates to remain at their current levels at least through the summer of 2019, and for as long as necessary to boost inflation to target, remained unchanged.

- Volvo’s Chinese owner Geely delayed plans for an IPO for the Swedish automaker on concerns of the valuation of the floatation given the on-going trade war between China and the US. Geely had hoped to raise $30 billion in the share sale.

- French bank Natixis announced Wednesday that it would sell a number of its financial businesses to BPCE, its majority shareholder, for 2.7 billion euros. The move will create a war chest that Natixis can use for acquisitions in asset management and investment banking.

- In a surprisingly strong move, the Turkish central bank raised official interest rates to 24% from 17.5% in bid to tame surging inflation and prevent a currency crisis. The lira rebounded after the announcement.

 

Japan

- Tokyo stocks rose 1.20% on Friday on easing trade tensions. The Nikkei 225 Index rose 3.53% for the week to end at 23,094.67

- The yield on 10-year Japanese government bonds rose to 0.1180% at the end of last week from 0.1130% at the previous week’s close as the Bank of Japan continued to allow slightly higher yields.

- Economic and Fiscal Policy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer will likely hold a second round of trade talks in Washington on Sep. 21, Reuters reported. The meeting would precede the expected U.S.-Japan summit meeting on Sep. 25 on the sidelines of the UN General Assembly meeting. Japan wants to avoid U.S. tariffs on its auto imports and is worried that U.S. demands for a bilateral free trade agreement would create pressure to open up its politically sensitive domestic agriculture market.

- Toyota expects its global vehicle production to set a new record this year for the second year in a row, Jiji Press reported. Toyota revised up its production estimate to 10,594,000 vehicles, up 1.2% from the previous year, due to strong demand in China.

 


Asia Pacific (ex Japan) & Emerging Markets

- The Shanghai Composite fell 0.18% on Friday and 0.76 for the week to close at 2,681.64, as lackluster data released Friday showed that the growth rate of fixed asset investment fell to an all-time low.
- Singapore stocks rose 0.95% on Friday, bringing the index back into the black for the week. The Straits Times Index rose 0.86% on the week to close at 3,161.42 on Friday.
- Brazil stocks rose 0.99% on Friday but fell 1.29% on the week, as pressure on the real from Argentina’s currency crisis weighed on the market. The Bovespa closed at 75,429.09.

- Russian stocks jumped 0.94% on Friday after the Russian central bank raised interest rates for the first time since 2014 to support the ruble. The RSTI rose 4.21% over the week to settle at 1,094.73.


- Indian stocks rose 0.99% on Friday after the government announced that Prime Minister Narendra Modi was meeting with top officials on the state of the economy. But the BSE 30 still fell for the second week in a row, down 0.78% to 38,090.64, the biggest weekly fall since the week ended May 18.

 

Commodities

- Crude oil prices rose on the week on worries about the effects of Hurricane Florence and U.S. sanction on Iran on world oil supply. The October West Texas Intermediate contract rose 0.6% Friday to $68.99 per barrel and was up 1.8% on the week. The WTI price rose to $70.37 earlier in the week, the highest since late July. The November Brent crude contract, used to price international oils, fell 0.1% on Friday but rose 1.6% on the week to close at $78.09, having hit their highest level since May earlier in the week.

- Gold prices fell on Friday on strong U.S. industrial production data but rose slightly on the week. December gold fell 0.6% on Friday but rose 70 cents over the week to settle at $1,201.10 per troy ounce.

 

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Source: Market News International, Schroders Investment Management

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