Markets in a Minute

AIN'T NOTHING GOING ON BUT THE BRENT

Last week was another down week for global equity markets as continued tensions in the Middle East pushed energy prices higher and major central banks hinted at inflationary concerns, causing bond yields to rise on both sides of the Atlantic.

This week looks to be a continuation as tensions continued to rise over the weekend. On Saturday night, President Trump issued an ultimatum to Iran to open the Strait of Hormuz "within 48 hours" or face attacks on power plants across the country. Iran responded by threatening strikes on a range on infrastructure across the Gulf region. Markets have responded negatively, opening in the red on Monday morning.

It was a tough week for European equities as investor sentiment was rattled by the intensifying conflict in the Middle East, particularly attacks on tankers in the Strait of Hormuz and damage to the Ras Laffan gas terminal in Qatar. Spokespeople from Ras Laffan estimated that 17% of the plan has been damaged and could take 3-5 years to fully restore.  Against the backdrop of soaring energy costs, the ECB met and held rates steady - President Lagarde cautioned that higher oil & gas prices will have a "material impact" on near-term inflation and stressed that the Bank will be closely monitoring data - the ECB revised its inflation forecast from 1.9% to 2.6%.  US equities also suffered a volatile week, closing lower as geopolitical tensions, oil price swings, inflation concerns and worries about future interest rates all added to investor worries. The Federal reserve wrapped up its March meeting voting 11-1 to leave rates on hold as expected and, while projections indicated one further rate cut this year, inflation forecasts were nudged higher leaving chair Powell to sound a warning about energy prices feeding into broader inflation concerns

The S&P 500 finished the week down -1.9% (-4.95% YTD) whilst the STOXX 600 in Europe dropped -3.79% in the week (-3.19% YTD). Further increases in energy costs and continued escalation in the Middle East were the main drivers.

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 by ~10bps to 4.38% as inflationary fears forced markets to recalculate their interest rate expectations. The German bund equivalent increased by ~8bps to 3.05%. The ECB and the US Fed kept rates on hold as expected but both raised concerns relating to near-term inflationary pressures.

• Monday 23rd - EU Consumer Confidence
• Tue 24th Global PMI's
• Thu 25th OECD economic outlook report rate announcement
• Fri 26th EU - Consumer expectations survey