RECORD HIGHS!
Equity markets hit new record highs last week as hopes of a truce drove a risk-on rally and Iran appeared to have opened up the strait of Hormuz for shipping.
Over the weekend, tensions rose once more as Iran appears to have fired on an Indian owned crude tanker in a reaction to the US continued naval blockade of Iranian ports. While the US has sent delegates to Pakistan to continue talks, Iranian participation is now in doubt after it seized an Iranian tanker this morning. The situation is tense and markets will closely watch developments.
This week, US Fed Chair nominee Kevin Warsh is due to have his senate hearing. President Trump is continuing to put pressure on the current chair to step down but Jerome Powell has committed to staying in place until his successor is confirmed. It's another big week for earnings and we get some inflation, retail sales and PMI data from the US and Europe.
The prospect of a peace deal in the Middle East was the main catalyst for equity markets last week and, despite talks appearing to break down on Tuesday, momentum carried through with a big rally on Friday prompted by Iran announcing that the strait of Hormuz was open to traffic once again. The S&P 500 recorded three record high closes and finished the week by passing the 7,100 point level for the first time in history. The tech heavy NASDAQ 100 followed suit and has now logged its most consecutive positive sessions since 2013. In Europe, the STOXX 600 also had a strong week and all three indices have now shrugged off the initial effects of the Iran crisis, returning to positive territory YTD. President Trump continued to put pressure on Fed Chair Jerome Powell to step down when his current term ends on 15th May, also refusing to cease investigations into Fed spending on the renovations of their HQ building. A New York Fed Governor also sounded fears that a supply shock could cause a stagflation issue for the economy. Over the weekend, tensions rose again in the Middle East as Tehran appears to have opened fire on an Indian-owned crude tanker - blaming the US's continued blockade of Iranian ports for the action. A delegation from both sides will meet in Pakistan this week to try and salvage talks.
The S&P 500 finished the week up 4.54% (4.1% YTD) whilst the STOXX 600 in Europe added 1.91% in the week (5.81% YTD). Optimism over the truce in the Middle East was the main driver.
Bond yields fell last week, (bond yields fall as bond prices rise) on both sides of the Atlantic. The 10-year US Treasury dropped 10bps to settle at 4.25%. After first rising on concerns of an undermining of Fed independence, yields dropped their back on Friday on the back of the peace trade and prospects of lower energy prices. The German bund equivalent followed suit, dropping by 11bps to 3.96%.
- Mon 20th - EU Updated Q4 GDP estimate * Germany PPI inflation data
- Tue 21st - US March Retail Sales data
- Wed 22nd - US State employment data
- Thu 23rd EU - Flash PMI data
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.