Weekly market overview - 21/09/2018

United States (US)

- U.S. stock markets rose last week as trade fears ebbed at the end of the week. The Dow Jones Industrial Average rose 0.32% on Friday to 26,743.50, posting its 13th record closing high this year and second last week. The index was up 2.25% for the week. The S&P 500 fell 0.04% on Friday from Thursday’s record high but rose 0.85% on the week to end at 2,929.67. The Nasdaq fell 0.51% on Friday and 0.29% on the week to 7,986.96, as tech stocks remained under pressure. Investors poured $14.5 billion into US stock markets last week, the largest inflow since March.

- The U.S. announced Monday it would impose a 10% tariff on an additional $200 billion of Chinese imports on September 24, but the tariff rate would not rise to 25% on January 1 next year, appearing to create a window of opportunity for negotiations. China immediately retaliated by imposing 5% to 10% tariffs on $60 billion of US imports. US President Donald Trump said it was likely the U.S. would have to impose tariffs on the remaining $267 billion in Chinese imports that have not already been sanctioned. China, which is nearly out of US imports on which to impose retaliatory tariffs debated last week a series of non-tariff measures to fight back in the escalating trade war.

- The yield on benchmark 10-year U.S. Treasuries rose sharply to 3.0628% at the end of the week from 2.9959% at the previous week’s close, as investors sold bonds to buy stocks. But the yield well on Friday after UK Prime Minister Theresa May warned that Brexit negotiations were deadlocked, reminding traders of still significant geopolitical risk.

- The Department of Justice opened an investigation into Tesla chief executive Elon Musk’s claim last month that he had arranged the financing to take the electric car company private. Those comments sent Telsa stock price sharply higher at the time, wiping out many investors who had shorted the stock.

- Coca-Cola, the world’s largest beverage company, said last week that it is considering investing in the nascent North American marijuana market. The company said it is “closely watching” the cannabis-based drinks market, which uses a non-hallucinatory extract from marijuana for health beverages. Any acquisition or product introduction would be part of the firm’s effort to diversify its product line away from carbonated beverages, which still account for 75% of sales.

- Invesco is nearing a deal to buy OppenheimerFunds for about $5 billion, which would bring the firm’s assets under management to more than $1 trillion. MassMutual put its OppenheimerFunds unit up for sale earlier this year. Sources told the Financial Times they did not expect the deal to close until October.

- Wells Fargo said it would cut 5% to 10% of its workforce over the next three years as it continued its efficiency push. The move is due in part to changing customer preference for digital banking over face-to-face interactions

- Credit card giants Visa and Mastercard, along with a series of top US banks, offered a $6.2 billion settlement for a long running antitrust lawsuit over the fees the companies charge retailers to use the cards. The settlement requires court approval. The offer is $900 million more than the previous settlement agreed in 2012.

 

United Kingdom (UK)

- London stocks rose last week on easing global trade tensions and optimism on Brexit after Bank of English Governor Mark Carney agreed to say on during the transition. The FTSE 100 rose 0.31% on Friday and 0.36% on the week to finish at 7,304.04.

- The yield on 10-year Gilts rose to .15300% at the end of last week from 1.4590% the previous week on concerns over continued concerns on trade and Brexit.

- Retail giant John Lewis reported Thursday that its first half profits fell 99% due to sharp discounting in the sector and competition on e-commerce. Profits fell to 1.2 million pounds, even as sales grew 1.6% to 5.5 billion pounds, as the company invested heavily in technology, staff and new product lines to keep up with the competition.

- British Steel will cut 400 jobs in the UK and Europe, about 10% of its workforce, as it struggles higher prices for materials caused by the weak pound and euro exchange rates. The layoffs are the first since the firm was rescued two years ago by investment firm Greybull, which bought it from Tata Steel for 1 pound

- Bank of England Governor Mark Carney will continue in his post until the end of January 2020 and Deputy Governor Jon Cunliffe has been given a new term lasting through to October 2023, Chancellor of the Exchequer Philip Hammond revealed Tuesday. Hammond told Parliament that the UK was facing testing times because of the Brexit process, and the re-appointments ensure continuity at the top of the central bank.

- Bank of England Governor Mark Carney said the monetary policy response to Brexit would not be automatic but would depend on how the UK's departure from the EU impacted the balance between supply and demand as well as the exchange rate.

 

Europe

- The yield on benchmark 10-year Bunds rose to 0.4500% last week from 0.3870% last week at the previous week’s final bell on continued trade concerns.

- European stocks rose last week on concerns about easing global trade tensions. The Eurofirst 300 rose 0.38% on Friday and 1.17% on the week to end at 1,477.83

- The European Central Bank reaffirmed Thursday its rate guidance and plans to wind down its asset purchase program, but stressed downside risks from protectionism and emerging markets. Eurozone growth remains "broad-based," President Mario Draghi said, adding that the latest data supported predictions for gradually rising inflation, despite a "slight" downward revision in the medium-term growth forecast in September's ECB staff projections

- French bank Natixis announced Wednesday that it would sell a number of its financial businesses to BPCE, its majority shareholder, for 2.7 billion euros. The move will create a war chest that Natixis can use for acquisitions in asset management and investment banking.

- In a surprisingly strong move, the Turkish central bank raised official interest rates to 24% from 17.5% in bid to tame surging inflation and prevent a currency crisis. The lira rebounded after the announcement.

 

Japan

- Tokyo stocks rose 1.20% on Friday on easing trade tensions. The Nikkei 225 Index rose 3.53% for the week to end at 23,094.67.

- The yield on 10-year Japanese government bonds rose to 0.1180% at the end of last week from 0.1130% at the previous week’s close as the Bank of Japan continued to allow slightly higher yields.


- Economic and Fiscal Policy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer will likely hold a second round of trade talks in Washington on Sep. 21, Reuters reported.

- Toyota expects its global vehicle production to set a new record this year for the second year in a row, Jiji Press reported. Toyota revised up its production estimate to 10,594,000 vehicles, up 1.2% from the previous year, due to strong demand in China.

 

Asia Pacific (ex Japan) & Emerging Markets

- The Shanghai Composite fell 0.18% on Friday and 0.76 for the week to close at 2,681.64, as lackluster data released Friday showed that the growth rate of fixed asset investment fell to an all-time low.

- South Korean stocks rose 1.40% on Friday and 1.61% on the week to close at 2,318.25, on improved global trade sentiment on hopes for progress in negotiations with North Korea.

- Brazil stocks rose 0.99% on Friday but fell 1.29% on the week, as pressure on the real from Argentina’s currency crisis weighed on the market. The Bovespa closed at 75,429.09.

- Russian stocks jumped 0.94% on Friday after the Russian central bank raised interest rates for the first time since 2014 to support the ruble. The RSTI rose 4.21% over the week to settle at 1,094.73.

 

Alternative Assets

- Crude oil prices rose on the week on worries about the effects of Hurricane Florence and U.S. sanction on Iran on world oil supply. The October West Texas Intermediate contract rose 0.6% Friday to $68.99 per barrel and was up 1.8% on the week. The WTI price rose to $70.37 earlier in the week, the highest since late July. The November Brent crude contract, used to price international oils, fell 0.1% on Friday but rose 1.6% on the week to close at $78.09, having hit their highest level since May earlier in the week

- Gold prices fell on Friday on strong U.S. industrial production data but rose slightly on the week. December gold fell 0.6% on Friday but rose 70 cents over the week to settle at $1,201.10 per troy ounce

 

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Source: Market News International, Schroders Investment Management

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