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Equity markets have enjoyed a stonking start to 2019.The US S&P 500 is ahead 11 per cent and the UK FTSE 100 is 7 per cent higher, as recession fears subside and central banks make ‘dovish’ (softer) noises around interest rates.For most investors, the fourth quarter sell-off (when the S&P fell a whopping 20%) is a distant memory.Life is good once again.

Its not just about a softer interest rate outlook, markets are optimistic on US-China trade talks with Donald Trump recently quoting “substantial progress” in Washington’s trade talks with Bejing. The US President suggested a summit with Chinese president Xi Jinping could be held at his Mar-a-Lago resort in Florida to “conclude an agreement” if more progress was made.

News of Trump extending the deadline on $200 billion of Chinese imports beyond March 1st boosted Chinese stocks and helped pushed the Renminbi currency to a seven-month high.China’s stocks surged 6% on the news marking a gain of 25% since January 4th.That took the main equity benchmark in bull market territory, defined as a 20% rally from its most recent trough.

UK equities have also regained ground keeping an eye on Theresa May’s next big vote on her Brexit deal on March 12th (pushed back from Feb 27th).


USD: The US Dollar, as measured by its (DXY) index against a basket of other currencies, has been in a 2-year range of broadly 88 (weakest) to 103 (strongest – just after Trump was elected).It is currently trading mid-range at 96. Although the outlook for US growth and interest rates has softened over the last 2 months, the US is still the ‘cleanest dirtiest shirt around’ i.e.interest rates might only be going up moderately in the US this year, perhaps 0.25%-0.50%, and so supporting the US Dollar, but rates are sure as heck not going up anywhere else with the growth outlook for the UK and Europe pretty dim.This is what is giving the US Dollar firm suport.

GBP: A note on the British Pound which has held up well against the US Dollar at broadly GBP/USD 1.30. What this exchange is rate is telling you is that there WILL be a Brexit deal and an orderly departure from the EU. If the FX market believed there was a real chance of ‘no deal’ Sterling would be 5-10% weaker right now! All the news and opinions are expressed in the market price today!

Fixed Income

As equities fell at the end of last year, and with still an air of volatility in equities markets, investors , as normal, are attracted to the ‘safe haven’ of government bonds. At one point last year, as investors thought US interest rates were going to rise, the yield on the US 10-year Treasury rose to 3.25% .As the outlook for higher US interest rates has softened (based on global economic growth and trade tensions) and as equities remain volatile, the appetite for bonds is strong (remember demand up, bond prices up , bond yields down) – the US 10-year Treasury yield is down at 2.70%.

Global bond yields move broadly together:UK and European bond yields are similarly significantly lower than a few months ago with only moderate growth outlooks in each economic region.


Oil remains close to $65 dollars per barrel.Trump renewed his criticism of high crude prices on Twitter, telling OPEC to “relax”.

Gold benefited from the flight out of equities in Q4 into ‘safe haven’ assets taking the price to over $1300 per ounce. With equities still volatile and, generally, a reasonably uncertain world around economic growth including trade tensions, gold remains well supported at $1320 per ounce.


S&P 500: 2800

Nasdaq: 7500

FTSE 100: 7200

Bonds – 10 Year Government Yields

US 2.70%

EU 0.20% 

GB 1.16%

Foreign Exchange 

EUR/USD  1.1400 (1 euro buys 1.1400 dollars)

GBP/USD  1.3200 (1 pound buys 1.3200 dollars)


OIL: Brent: 65.00 (dollars per barrel)

GOLD: 1320 (dollars per ounce)

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