Week in Markets (Week Ending June 16, 2019)

June 17, 2019

Key News and Events

  • U.S.-China trade negotiations have continued to stall over the week.  U.S. President Donald Trump threatened to impose a new round of tariffs on Chinese imports if Xi Jinping, his Chinese counterpart, fails to meet with him at the G20 summit scheduled in Japan later this month. China threatened global tech giants with serious repercussions if they co-operate with U.S. bans against Chinese technology companies.
  • Boris Johnson, the former foreign secretary, won the first round of the Conservative leadership contest with 114 out of 313 votes, putting him in pole position to be the next UK Prime Minister.
  • Tensions escalated further in the Middle East as two oil tankers were attacked in the Gulf of Oman. U.S. officials blamed Iran for the recent attacks in the region, although no group admitted responsibility for these attacks.

Week in Markets

Equities

  • Global equity markets rose over the week.
  • The S&P 500 index rose by 0.5% over the week, outperforming the MSCI World index, which rose by 0.2%. On a year-to-date basis, the S&P 500 index outperformed the MSCI World index (16.3% vs 14.7%).
  • U.S. Large Cap stocks underperformed Small Cap stocks over the week, as the S&P 500 index rose by 0.5% while the Russell 2000 index rose by 0.6%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (16.3% vs 13.6%).
  • Growth stocks underperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks rose by 0.5% while Value Stocks rose by 0.6% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (20.1% vs 13.1%).

Bonds

  • The 10-year U.S. treasury yield rose by 1bps to 2.09% and the 30-year U.S. treasury yield rose by 2bps to 2.59% over the week.
  • The 20-year TIPS yield rose by 11bps to 0.67% and the 20-year breakeven inflation fell by 9bps to 1.71% over the week.
  • The spreads on the Bank of America Merrill Lynch U.S. Corporate Index fell by 2bps to 132bps and the spreads on the Bloomberg Barclays Long Credit Index fell by 2bps to 175bps over the week.
  • The U.S. High Yield bond spread over U.S. treasury yields fell by 14bps to 423bps and the spread of USD denominated EM debt over U.S. treasury yields fell by 3bps to 365bps over the week.

Commodities

  • The S&P GSCI index fell by 0.1% in USD terms over the week.
  • The S&P GSCI Energy index fell by 1.6% as the price of WTI crude oil fell by 2.7% to US$53/BBL.
  • Industrial Metal prices rose by 0.4% as copper prices rose by 0.6% to US$5,806/MT.
  • Agricultural prices rose by 5.2% and gold prices rose by 0.8% to US$1,351/Oz.

Currencies

  • The U.S. dollar appreciated against all major currencies over the week.
  • Sterling depreciated by 1.2% against the U.S. dollar over the week, ending the week at $1.26/£.
  • The euro depreciated by 1.0% against the U.S. dollar over the week, ending the week at $1.12/€.
  • The Japanese yen depreciated by 0.4% against the U.S. dollar over the week, ending the week at ¥108.43/$.
  • The Canadian dollar depreciated by 0.6% against the U.S. dollar over the week, ending the week at C$1.34/$.

Highlighted Last Week Releases

Region

Description

Comment

U.S.

CPI YoY

Consumer price inflation in the year to May slowed to 1.8%, down from the five-month high of 2.0% recorded previously. Slowing inflationary pressures amidst signs of slowing global growth would be of interest to the Federal Reserve (Fed) at its meeting this week. Whilst markets do not anticipate a rate cut at Wednesday's meeting, the Fed is widely expected to cut rates at least once during the second half of 2019.

UK

Industrial Production MoM

Industrial production fell by 2.7% in the month of April, recording the largest monthly fall in nearly 7 years. This is driven by a 3.9% fall in manufacturing production, the largest fall in almost 17 years, as the boost from Brexit stockpiling in the previous month dissipated and car producers went ahead with planned shutdowns.

Eurozone

Sentix Investor Confidence

Investor confidence in the Eurozone unexpectedly fell back into the negative territory in June, amidst a renewed escalation of the US-China trade dispute.

Sources: Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Datastream. Click here for index descriptions.

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