A MIXED WEEK
Equity market divergence continued last week. European indices closed relatively flat as economic data suggested that high energy prices are doing some damage. US markets notched new all-time highs as earnings and jobs growth beat estimates.
This week, markets will continue to focus on developments in the Middle-East and the 'on-again, off-again' truce talks. Trump travels to China for talks with Xi on Thursday and we get inflation and GDP data from the US & Europe.
Earnings again provided a tailwind for US equity markets last week. 89% of S&P 500 companies have now reported with 84% beating earnings estimates and recording net profit growth of over 13%. A US payroll report on Thursday showed that the economy had added 115,000 in April - nearly twice that of estimates. With unemployment still at 4.3%, the report paints a picture of a low-hire, low-fire jobs market that has slowed down but not capitulated. Events in the Middle-East also played a part. On Wednesday, an Axios report that a deal may be close sent markets rallying only to pull back on Thursday as President Trump sounded unimpressed by the Iranian response. On Friday, both sides exchanged fire and without a bumper jobs report to offset sentiment, European indices gave up their gains.
The S&P 500 finished last week up 2.3% whilst the STOXX 600 in Europe added 0.1% in the week. Solid earnings results and a strong US employment report being the main catalysts.
Bond yields fell last week, (bond yields fall as bond prices rise) on both sides of the Atlantic. The 10-year US Treasury dropped 6bps to settle at 4.36% as investors looked toward a ceasefire. The German bund equivalent followed suit, dropping by 3bps to 3.01%.
- Tue 12th- US Inflation rate YoY
- Thu 14th - US Retail Sales * UK GDP growth
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.