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Global Markets Review

5c5939ff74124
BM.GE
05.02.19 11:08
736
Galt & Taggart has gathered over 50 facts and figures about global financial markets. in last week volatility has continued its downward trend. Brexit, crisis in Venezuela and recession in Italy have fueled uncertainty to global markets. 

United States
  • Volatility continued its recent downward trend, with the Cboe Volatility Index (VIX) touching a nearly two-month low on Thursday.
  • Communication services shares fared best within the S&P 500 Index, helped by a sharp rise in Facebook after the company reported better-than-expected fourth-quarter earnings.
  • Stability in reported user engagement despite recent social media controversies also encouraged investors.
  • A revenues beat by broadband provider Charter Communications provided a further lift to the sector.
  • Energy and industrials shares also performed well, with the latter helped by better-than-expected revenues from General Electric.
  • A drop in longer-term bond yields weighed on the financial services sector by threatening bank lending margins.
  • Fourth-quarter earnings releases drove much of the market’s trading, with 117 companies within the S&P 500 reporting results.
  • Stocks fell Monday after disappointing results from NVIDIA, a maker of graphics chips used in gaming and artificial intelligence, and Caterpillar, the heavy equipment exporter whose fortunes are tied closely to global economic conditions.
  • Stocks regained momentum at midweek, however, after Apple reported a slight gain in earnings and a smaller drop in revenue than many had feared given recent press over falling iPhone sales. Facebook’s gains also helped lift the major indexes, but results were mixed for Amazon.com and Microsoft.
  • The biggest boost to overall sentiment during the week seemed to come following the end of the Fed's meeting on Wednesday. The central bank decided to keep rates steady, as widely expected, but investors were cheered by an unexpectedly dovish post-meeting statement.
  • The statement removed all reference to further rate increases, suggesting that Fed officials will probably wait at least until June before taking any further action.
  • The Fed’s dovish stance helped encourage a decline in longer-term bond yields, with the yield on the benchmark 10-year Treasury note falling to its lowest level in nearly a month on Thursday before rising somewhat following the strong jobs report on Friday.
  • Municipal bonds continued to see light trading as new supply remained underwhelming.
  • Trading activity picked up slightly as the week progressed, as positive cash flows and attractive yields relative to Treasuries helped spur some positive performance.
  • The investment-grade corporate bond market was mostly focused on issuance, and new supply volume was in line with expectations. The firm’s traders observed that risk-on sentiment had faded somewhat compared with the previous week, but month-end buying led to healthy demand that bolstered the performance of many new deals.
  • The Fed’s patient stance buoyed high yield market sentiment, in particular. Energy issues, which are heavily represented in the asset class, also benefited from reports of OPEC production declines in January and the announcement of U.S. sanctions on Venezuela’s oil industry, which sparked a two-day oil price rally.
  • After weeks of speculation, California utility company PG&E officially filed for Chapter 11 bankruptcy protection due to lawsuits and liabilities related to the recent wildfires.
Brexit
  • The pan-European STOXX Europe 600 Index gained slightly, but its advance was tempered by ongoing Brexit and U.S.-China trade uncertainty, weak regional data, and news that Italy’s economy fell into recession.
  • The British pound lost ground against the U.S. dollar as British Prime Minister Theresa May said she would seek to reopen Brexit negotiations with the European Union (EU).
  • However, the EU said it would not reopen the legally binding text of the Brexit withdrawal agreement, which was completed in November and lays out the terms of the UK’s exit from the eurozone.
  • May’s announcement came after she won support in the House of Commons to renegotiate key points of contention, including the so-called backstop aimed at maintaining an open border on the island of Ireland.
  • European Commission President Jean-Claude Juncker warned May that any attempt to reopen Brexit negotiations with the EU will increase the chance of a disorderly Brexit.
Italy
  • Italy’s stocks declined more than 1.5% as preliminary data showed the country’s economy fell into a technical recession in the last half of 2018.
  • Goss domestic product contracted by 0.2%—more than consensus estimates—in the last three months of 2018, following a 0.1% drop in the third quarter.
  • This is the third time in a decade that Italy has fallen into recession, and the decline comes after a sharp increase in government borrowing costs and political uncertainty driven by the euro-skeptic government’s standoff with the EU over its budget plans.
  • IHS Markit’s purchasing managers’ index (PMI) for manufacturing dropped more than expected to 47.8 in January—signaling the sharpest deterioration in Italy’s manufacturing sector since 2013.
Eurozone
  • The EU statistics agency reported that the eurozone economy grew by 1.8% in 2018, its weakest pace in four years.
  • In addition to Italy’s standoff with the EU, the region’s economy was hit by a slowdown in exports, protests in France, and inventory backlogs in Germany’s automobile sector caused by new emissions testing requirements.
  • The Nikkei 225 Stock Average gained 15 points (0.1%) for the week and closed on Friday at 20,788.39, ahead 3.9% in 2019.
  • he large-cap TOPIX Index and the TOPIX Small Index modestly declined for the week and have recorded year-to-date gains of 4.7% and 2.8%, respectively.
  • At the close of Japanese trading on Friday, the yen stood at ¥109.11 per U.S. dollar, little changed for the week and since the end of 2018.
  • Exports, which make up about 17% of Japan’s gross domestic product, declined 3.8% in December compared to a year earlier.
  • The government said that the uncertainty about the U.S.-China trade war caused the export weakness, leading the Cabinet Office to downgrade its January monthly assessment.
  • The most impacted areas are semiconductor manufacturing equipment and electronics shipments to China (in part due to slowing demand for smartphones).
  • The Cabinet Office maintained its overall assessment for economic growth, but most economists believe that Japan’s economy will slow in 2019.
  • Japanese retail sales rose a better-than-expected 1.3% year over year in December, following a 1.4% gain in November.
  • The improvement, which was largely in the clothing and home appliances segments, alleviates some concerns about the outlook for Japanese private consumption.
  • Retail sales account for approximately 60% of the Japanese economy. According to preliminary data from the Ministry of Economy, industrial production declined 0.1% versus the year-ago period in December.
  • he dour data confirmed the latest Nikkei-Markit flash manufacturing PMI reading, which suggests continued weakness in the factory sector in January.
China
  • Chinese stocks gained as hopes for a possible trade deal with the U.S. offset concerns over an influential private manufacturing gauge that fell to its worst reading since 2016, the latest evidence of the country’s deepening growth slowdown.
  • For the week, the Shanghai Composite Index edged up 0.6% and the large-cap CSI 300 Index, China’s blue chip benchmark, climbed almost 2.0%.
  • Both gauges rallied more than 1.0% on Friday, the last day of trading before mainland markets close for a week-long holiday for the Chinese New Year.
  • With only a month left before the U.S. is set to ratchet up tariffs on Chinese imports, momentum has been building toward a possible trade deal.
  • On Thursday, President Trump said that he would send Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer to China in mid-February for the next round of talks.
  • Their visit comes after a Chinese delegation led by Vice Premier Liu He held talks with U.S. officials in Washington last week.
  • Should both sides fail to broker an agreement by March 1, the Trump administration has said it will hike tariffs to 25% from their current 10% level on $200 billion in Chinese-made goods.
Brazil
  • Shares in Brazil, as measured by the Bovespa Index, returned about 0.2%.
  • Shares of Vale—the world’s largest producer of iron ore, and a major component of the index—plunged on Monday following the recent collapse of a tailings dam at one of its mining complexes, resulting in more than 100 deaths and the disappearance of more than 200 people, many of whom are Vale employees.
  • The broader market recovered as the week progressed, in part because Vale announced that it would curtail its iron ore production by about 10% in order to decommission several dams, in the interest of safety, over the next few years.
Venezuela
  • Venezuelan fixed income assets continued to rise amid speculation that there may soon be a resolution to the political standoff between Nicolas Maduro, who was reelected in a May 2018 election that many claim was marked by fraud and irregularities, and Juan Guaido, the head of the democratically elected National Assembly who recently declared himself interim president.
  • The U.S. decision to impose sanctions on Venezuela's state-owned oil company Petróleos de Venezuela on Monday was seen as adding to existing pressure on the Maduro regime.
  • The proceeds from any oil sales will be held in the U.S. until Maduro steps down. If he does, the change in government could be a precursor to a formal debt restructuring. 
Source - Galt & Taggart