Week in Markets (Week Ending May 19, 2019)

May 20, 2019


  • China retaliated to last week’s increase in U.S. tariffs on its imports by imposing tariffs on $60 billion worth of American imports. Tensions further escalated when U.S. President Donald Trump declared a “national emergency on the U.S. telecommunication sector”, which gave the Department of Commerce power to “prohibit transactions which posed an unacceptable risk”. This could prevent Chinese technology giant Huawei from selling into the U.S. market and working with U.S. suppliers such as Android developer Google and semiconductor manufacturer Qualcomm. However, the U.S. de-escalated tension elsewhere, delaying the imposition of tariffs on auto imports from the European Union (EU) for another six months and removing steel and aluminium tariffs for Canada and Mexico.
  • Tensions arose in the Middle East as Saudi oil facilities were attacked just two days later after oil tankers were sabotaged by drones near the UAE. The U.S. attributed responsibility for the attacks to Iran and Iran-backed Houthi rebels. Tensions in the middle east have been rising since the U.S. re-imposed sanctions on Iranian oil exports. However, the U.S. president claims he does not wish to go to war with Iran, albeit assuring that U.S. interest must be protected, and the U.S. military is braced for all imminent threats from Iran backed forces.
  • The S&P 500 index fell by 0.7%, marginally underperforming the MSCI World index, which fell by 0.3% over the week. On a year-to-date basis, the S&P 500 index has outperformed the MSCI World index (15.0% vs 13.7%). 
  • U.S. Large Cap stocks outperformed Small Cap stocks over the week as the S&P 500 index fell by 0.7% while the Russell 2000 index fell by 2.3%. On a year-to-date basis, the S&P 500 Index has outperformed the Russell 2000 Index (15.0% vs 14.4%).
  • Growth stocks and Value stocks both fell by 0.7% each over the week as measured by the MSCI USA Growth and Value Indices. On a year-to-date basis, Growth stocks have outperformed Value stocks (18.6% vs 11.9%).


  • The 10-year U.S. treasury yield fell by 5bps to 2.40% and the 30-year U.S. treasury yield fell by 4bps to 2.84%, driven by weak retail sales and industrial production data. The 20-year TIPS yield and the 20-year breakeven inflation both fell by 2bps each to 0.77% and 1.88% respectively.
  • The spreads on the Bloomberg Barclays Capital Long Credit Index rose by 1bp to 167bps and the Bank of America Merrill Lynch U.S. Corporate Index rose by 2bps to 124bps. The U.S. high yield bond spread over U.S. treasury yields rose by 5bps to 406bps over the week. The spread of USD denominated EM debt over U.S. treasury yields rose by 5bps to 361bps over the week.


  • The S&P GSCI index rose by 2.1% in USD terms over the week. The S&P GSCI Energy index rose by 2.2% as the price of WTI Crude oil rose by 1.8% to US$63/BBL. Industrial metal prices rose by 0.1% despite copper prices falling by 1.8% to US$6,025/MT. Agricultural prices went up by 4.9% and gold prices fell by 0.5% to US$1,281/Oz.   


  • The U.S. dollar appreciated against all major currencies over the week. The U.S. dollar appreciated by 2.3% against sterling, ending the week at $1.27/£. The U.S. dollar appreciated by 0.8% against the euro, finishing the week at $1.12/€. The U.S. dollar appreciated by 0.3% against the Japanese yen, ending the week at ¥109.98/$. The U.S. dollar appreciated by 0.2% against the Canadian dollar, ending the week at C$1.35/$.   

Economic Releases

  • In the U.S., retail sales contracted by 0.2% in the month of April, underperforming the expected increase of 0.2% and significantly below the upwardly revised growth of 1.7% recorded in the previous month. Industrial production also fell by 0.5% in April, down from the upwardly revised expansion of 0.2% recorded in the previous month and below expectations for a flat growth rate. On a more positive note, consumer sentiment rose to a 15-year high, as indicated by the University of Michigan’s consumer sentiment index, which rose to 102.4 in May, outperforming expectations of a level reading of 97.2. Elsewhere, the Philadelphia Fed Business Outlook rose by 8.1 points to 16.6 in May, beating expectations for a smaller increase to 9.0.
  • Eurozone industrial production contracted by 0.3% in March as expected, following the 0.1% contraction recorded previously. In Europe, the ZEW Indicator for Economic Sentiment fell to -1.6 in May from 4.5 recorded previously. The German Indicator of Economic Sentiment also declined, decreasing to -2.1 from 3.1, against expectations for an improvement to 5. The German economy grew by 0.4% in Q1 2019 as expected, following a flat reading in the previous quarter.
  • Japanese economic growth unexpectedly accelerated in Q1 2019. Supported by stronger than expected exports numbers, preliminary readings indicated an annualized economic growth rate of 2.1%, against analysts’ forecasts for a 0.2% contraction and above the downwardly revised annualized growth rate of 1.6% in the previous quarter. However, business spending and private consumption contracted by 0.3% and 0.1% respectively. The current account surplus widened from ¥2676.8bn to ¥2847.9bn in March, but this was below forecasts of a ¥3020.0bn surplus. In addition, the Tertiary Industry index fell by 0.4% in March against a forecasted increase of 0.1%, but this was better than the previous month’s 0.6% decrease.
  • In China, industrial production grew by 5.4% in the year to April, significantly below the 8.5% increase in the previous month and below the expected 6.5% increase. Fixed asset investment grew by 6.1% (year-to-date April) from a year earlier, below expectations of a 6.4% growth. Retail sales growth slowed to 7.2% from 8.7% in the year to April, marking the slowest pace of growth since May 2003.

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

The information contained above should be regarded as general information only. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of acting on this information, particularly in the context of your own objectives, financial situation and needs. Nothing in this document should be treated as an authoritative statement of the law on any particular issue or specific case. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal, tax or investment advice. Please consult with your independent professional for any such advice. The information contained within this blog is given as of the date indicated and does not intend to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information since the date of publication, or any obligation to update or provide amendments after the original publication date. The blog content is intended for professional investors only.

Previous Article
Week in Markets (Week Ending July 21, 2019)
Week in Markets (Week Ending July 21, 2019)

No More Articles