The FTSE100 enjoyed a strong bounce last week with the domestic main market posting a +4.0% gain. It was helped in part by another difficult week for sterling which dropped by more than -3.0% against both the Euro (to €1.08) and the US Dollar (to $1.28). With many of the companies in the index deriving the majority of their revenues and profits from overseas, a weaker sterling has a positive translation effect. sterling has struggled over the past month due to Brexit concerns and negotiations between the UK and the EU deteriorated further last week after Parliament threatened to renege on part of its initial withdrawal agreement (T.Rowe Price).
Elsewhere in global equity markets, the S&P500 retreated by a further -2.5% with the technology sector continuing to see some selling pressure. Profit taking amid particularly lofty valuations could be the cause behind the change in sentiment. In Europe, equity markets shook off rapidly rising COVID-19 cases to post another week of gains; the German DAX30 and French CAC40 rose by +2.8% and +1.4%. Japanese equities also concluded the week in positive territory, the Nikkei 225 adding +0.9%. Yoshihide Suga looks set to replacement Shinzo Abe as the country’s Prime Minister with the latter recently announcing his resignation due to being in poor health.
Moving to the sovereign debt markets, yields ticked lower on both sides of the Atlantic. The 10-year gilt yield declined by 8 basis points (bps) to 0.18% whilst its American treasury counterpart fell by 6bps to 0.67%. In Europe, the benchmark 10-year security was flat, closing out the week at an unchanged -0.43%.
Finally, from last week, Brent Crude dropped below $40.00. Brent had hit a five-month high just a couple of weeks ago but a deterioration in the outlook for global demand resulted in a -6.6% drop in the price, taking it to $39.83 a barrel. Meanwhile, Gold recovered some of its losses from the previous week with the precious metal rising by +1.4% to $1,948 an ounce. (Thomson Reuters DataStream)
It’s a busy week for the domestic economic data calendar with a number of headline publications due before the close of play on Friday. On Tuesday, the latest unemployment figures are expected to show a modest uptick in the jobless rate although the government furlough scheme is likely to be masking the true extent of the pandemic impact. Headline CPI inflation and retail sales for March are the other two stand out releases from the UK this week whilst on Thursday, the Bank of England hosts its monthly policy meeting.
In the US, the Federal Reserve also hosts its monthly policy meeting this week with updated economic projections set to be provided. In terms of data, industrial production and retail sales are amongst the more notable releases whilst the housing sector also comes back into focus in the form of building permits and housing starts.
Industrial production for the Eurozone was published on Monday morning with Thursday’s CPI inflation number the only other figure of interest. Meanwhile, in China, it’s also a busy week for fresh data with fixed asset investment, industrial production, retail sales and unemployment all due before Tuesday. Finally, in Japan, the Bank of Japan holds its own monetary policy meeting where, like its UK and US counterparts, no changes are expected to be implemented this time around. (Forex Factory)
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