Asian markets got off to a strong start last week, but began to falter mid-week as tensions began to rise between the U.S. and Russia over a potential military strike by the U.S. against Syria. U.S. President Trump made comments to calm fears, and Friday saw markets making a recovery, albeit a tepid one as China reported a surprise March trade deficit. On a weekly basis the Hang Seng in Hong Kong outperformed easily, gaining 3.2%, although most of that came at the beginning of the week. Mainland China managed a 1% gain, despite Friday’s weakness following the trade deficit report. Japan’s Nikkei also added 1% as the Yen weakened to close out the week. Australia’s S&P/ASX 200 gained modestly for a third consecutive week, advancing 1.1%, and the week’s underperformer was South Korea’s Kospi, which advanced 0.7%.
The coming week will almost certainly see continued volatility as we still have China/U.S. trade issues simmering, as well as the geopolitical risks of Saturday’s U.S. military strike against Syria. Perhaps most unsettling for markets, however, is the ever-present chance of some surprise policy move from the White House. Chinese equities are expected to rebound, as the March deficit will be written off as seasonal variance due to the Chinese Lunar New Year. The most interesting opportunity could come from Japan, where the Yen has fallen to an eight-week low against the USD and broken through a resistance level that could give it far further to fall.
European markets saw modest weekly gains, rising for the third week in a row. There was a pullback mid-week on concerns over a possible U.S. missile strike against Syria, but markets quickly recovered and spent the final two sessions of the week gaining. The broad based, pan-European Stoxx Europe 600, the broadest measure of European equities, finished with a 1.2% weekly gain. Germany’s DAX outperformed the region as it tacked on 1.7%, and in Paris and London the CAC 40 and FTSE 100 both advanced 1.1% for the week. Markets are continuing to show volatility and that has muted gains to some extent.
The coming week could be a better one for equities as Chinese trade had calmed by the end of last week, but the US and its allies came through on their Syrian threats. Of course, that doesn’t mean that either issue couldn’t flare up once more, or that some new development could hurt investor sentiment. However, even with the recent negative news stories, markets have managed to climb slowly and steadily higher. We will also see earnings season pick up in the coming week, and expectations are that it will be good, meaning equities could trade back to their 2018 highs.
Despite some volatility, the U.S. markets were the best performing globally, bouncing back from their weekly loss in the previous week. By Friday, the S&P 500 had climbed 2%, while the Dow Industrials booked a 1.8% gain, and the Nasdaq outperformed handily as it climbed 2.8%. The energy sector contributed greatly to the weekly gains as it surged higher in response to the daily gains from crude. The technology sector was also a leader, reclaiming losses from the past few weeks as worries over a trade war have receded.
The coming week is expected to be good, as earnings season has kicked off, and expectations are for very good first quarter earnings. That is a doubled edged sword however, because the high expectations make it easier for investors to be disappointed, and if that gets combined with more uncertainties from White House policies and surprises we could be in for a rough patch in equity markets.
Gold posted a weekly gain for the second consecutive week, adding 0.8% as it rose in four of the five trading sessions. While geopolitical and trade issues did calm during the week, they haven’t disappeared and that kept money flowing into gold as a haven. The coming week could possibly see geo-political tensions prompting investors to stake capital in the safe-haven of gold.
Crude had an amazing week, with the West Texas Intermediate contract adding 8.6%, while the Brent crude contract gained roughly 8%. Both remain at their highest levels since December 2014. Crude began the week with gains as trade tensions eased, then got a further boost on the possibility of supply disruptions following the threat of U.S. military action against Syria and additional sanctions against Russia. The coming week may see geopolitical tensions for the Middle East and Russia maintaining upside pressure on crude. Friday also saw the International Energy Agency state that global crude supplies are dropping, which should give a boost, at least on Monday.
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|13:30||USD||Empire State Manufacturing Index|
|18:15||USD||FOMC Member Bostic Speaks|
|Tentative||USD||Treasury Currency Report|
|02:30||AUD||Monetary Policy Meeting Minutes|
|03:00||CNY||Fixed Asset Investment ytd/y|
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|03:00||CNY||NBS Press Conference|
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|15:00||CAD||BOC Monetary Policy Report|
|15:00||CAD||BOC Rate Statement|
|15:30||USD||Crude Oil Inventories|
|16:15||CAD||BOC Press Conference|
|09:30||GBP||Retail Sales m/m|
|13:30||USD||Philly Fed Manufacturing Index|
|00:30||JPY||National Core CPI y/y|
|12:30||EUR||German Buba President Weidmann Speaks|
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|Day 1||ALL||IMF Meetings|