MIXED MESSAGES
Equity markets suffered another volatile trading week as investors grappled with reconciling talks of diplomacy with continuing military escalations.
Over the weekend, Houthi rebels joined the conflict and threatened to close the bab-el-mandeb strait while the US continued to amass troops in the gulf area in what is broadly seen as a precursor to a possible ground invasion.
This week, markets will continue to watch developments in the Middle East for signs of a diplomatic solution ahead of President Trump's 6th April deadline. Economic data is light in a shortened week but US employment and Eurozone inflation data may be of interest.
Developments in the Middle East continued to dominate markets last week resulting in a rollercoaster for equity investors. After a rally on Monday which was driven by President Trump delaying strikes against Iranian infrastructure, negative comments from Iranian officials reversed sentiment on Tuesday. Sentiment rose mid-week as the US administration announced a 10-day window to allow talks to continue. By Thursday, however, a series of escalatory strikes across the Gulf region pushed crude oil prices higher and precipitated a renewed sell-off which persisted until trading closed on Friday. The weekend saw a series of further escalations as the Houthi rebels in Yemen launched a number of strikes against Israel and threatened to shutter the bab-el-mandeb strait which would put further pressure on shipping by re-routing freight through the Suez canal and around Africa's Cape of Good Hope. Elsewhere, we will also see US job opening and employment data, Eurozone inflation data and Global PMI reports.
The S&P 500 finished the week down -2.12% (-6.96% YTD) whilst the STOXX 600 in Europe added 0.35% in the week (-2.85% YTD). Further increases in energy costs and continued escalation in the Middle East were the main drivers while initial jobless claims in the US came in at 210,000 - in line with expectations.
Bond yields rose again last week, (bond yields rise as bond prices fall) on both sides of the Atlantic. The 10-year US Treasury yield rose slightly to settle at 4.43% as inflationary fears forced markets to recalculate their interest rate expectations. The German bund equivalent increased by ~6bps to 3.10% as ECB President Lagarde signalled readiness to adjust policy "at any meeting".
- Monday 30th - EU German inflation data
- Tue 31st EU - March Eurozone inflation figures * US - Job Openings (JOLTS)
- Wed 1st Global PMI's * EU - February employment figures
- Fri 3rd US - March employment figures
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.