Asian markets put in a mixed performance last week, with several holidays muting volumes across the region, and markets ending on a weak footing. Australia’s S&P/ASX 200 outperformed and put in the best performance of the week, rising 1.8% as banks reversed prior weakness and resource shares made good gains. Both the Hang Seng in Hong Kong and the Kospi in South Korea got off to a good start, but then fell for three consecutive sessions at the end of the week, with both posting weekly losses of 1.2%. Mainland China’s Shanghai Composite gained modestly, adding 0.2% as investors are hoping a meeting between U.S. and Chinese officials will yield some relief from trade and tariff issues. Japan’s Nikkei finished the week flat, with a 0.02% gain as it was closed for three of the week’s five trading sessions.
The coming week could hopefully see some recovery for equities, as we can imagine most of the negative sentiment over the potential for U.S. interest rates to rise more than expected for the rest of the year is already priced in. Much will depend on the news from Beijing regarding the trade negotiations with the U.S.; and good news on that front could be just the catalyst markets need to break out of the current uncertainty and volatility.
European markets held up fairly well throughout the previous week, gaining on most days, and posting good weekly results. The CAC 40 in France has gained for six consecutive sessions, and was 1.6% higher on a weekly basis, but that wasn’t the best weekly result. That award goes to Germany’s DAX, which added 1.9% for the week, despite dropping nearly 1% on Thursday. The pan-European Stoxx Europe 600 had a modest 0.6% weekly gain, and in the U.K. the FTSE tacked on 0.9% as it finished the week at its highest level since January. European markets got a boost from falling currencies throughout the week, with the weaker Euro and Pound supportive of European and British multi-national companies.
If we continue seeing the U.S. dollar strengthen versus the Euro and Pound we can likely expect to see more gains from European equities. It could be a rocky start to the week however, as both the Euro and the Pound are just above support levels, and the U.S. dollar might find it difficult to make more gains against its European rivals. We’ll also be getting the results of trade negotiations between China and the U.S., which could have a strong impact. Finally, the Bank of England meets on monetary policy on Thursday, which should see equities on hold ahead of the meeting.
Despite continued good earnings from U.S. corporations, it wasn’t a good week for equities. Both the Dow Industrials and the S&P 500 finished the week with a 0.2% loss, even though both gained more than 1% on Friday to close out the week. The Nasdaq did better, with Apple fueling a tech rally Friday on news that Warren Buffet’s Berkshire Hathaway added 75 million shares of the iPhone maker in the first quarter of the year. The Nasdaq gained 1.3% for the week after surging 1.7% higher on Friday, thanks largely to the gains from Apple.
We’re afraid things might be getting ugly for U.S. equity investors. The more-than-good earnings this quarter have done little to help equities, and with earnings season coming to an end soon there won’t be that support for markets. Add to this the strengthening U.S. dollar and the possibility of rising interest rates, and it looks like we could be heading into the summer with markets in a correction at the least, and a bear market in the worst case. The coming week will depend heavily on the results of last week’s trade negotiations between China and the U.S., as well as whether the U.S. dollar continues to firm against rivals.
The stronger dollar has been a thorn in gold’s side, causing the precious metal to drop 0.6% in the past week. Gold did manage to put together two winning sessions to end the week, but we don’t think that’s going to continue as markets open to trade this week, unless the U.S. dollar begins to soften.
Crude fell on Tuesday and looked as if it would break down, but the chance of sanctions against Iran and economic upheaval in Venezuela kept the threat of supply disruptions alive; and by the end of the week crude was back at a more than 3-year high as it added 2.4% for the week. The coming week could see the Iran issue resolved satisfactorily, but the Venezuela issue promises to be around for some time. Plus, we have the summer driving season just around the corner; and if crude inventories begin to fall we could see the $80 level soon tested.
|00:50||JPY||Monetary Policy Meeting Minutes|
|02:30||AUD||NAB Business Confidence|
|07:00||EUR||German Factory Orders m/m|
|All Day||GBP||Bank Holiday|
|09:30||EUR||Sentix Investor Confidence|
|02:30||AUD||Retail Sales m/m|
|04:00||NZD||Inflation Expectations q/q|
|07:00||EUR||German Industrial Production m/m|
|All Day||EUR||French Bank Holiday|
|08:30||GBP||Halifax HPI m/m|
|10:30||AUD||Annual Budget Release|
|01:30||AUD||Westpac Consumer Sentiment|
|13:30||USD||Core PPI m/m|
|15:30||USD||Crude Oil Inventories|
|22:00||NZD||Official Cash Rate|
|22:00||NZD||RBNZ Monetary Policy Statement|
|22:00||NZD||RBNZ Rate Statement|
|23:00||NZD||RBNZ Press Conference|
|00:50||JPY||BOJ Summary of Opinions|
|02:10||NZD||RBNZ Gov Orr Speaks|
|All Day||CHF||Bank Holiday|
|All Day||EUR||French Bank Holiday|
|All Day||EUR||German Bank Holiday|
|09:00||EUR||ECB Economic Bulletin|
|09:30||GBP||Manufacturing Production m/m|
|09:30||GBP||Goods Trade Balance|
|12:00||GBP||BOE Inflation Report|
|12:00||GBP||MPC Official Bank Rate Votes|
|12:00||GBP||Monetary Policy Summary|
|12:00||GBP||Official Bank Rate|
|12:00||GBP||Asset Purchase Facility|
|12:00||GBP||MPC Asset Purchase Facility Votes|
|13:30||USD||Core CPI m/m|
|14:00||CAD||Gov Council Member Wilkins Speaks|
|15:00||USD||Prelim UoM Consumer Sentiment|