Equities
Equity markets are broadly unchanged over the last fortnight and markets are generally a lot calmer and much less volatile than the beginning of the year.
Indeed equity markets have regained much of the falls of January and February: The US markets (S&P 500 and Dow Jones Industrial Average) are now broadly at the levels they started the year at. European markets have also recovered but not to the same extent given weak European economic fundamentals and ‘Brexit’ fears in the UK.
The UK markets is down 1.75% for the year, France down 5.80% and Germany 7.80%.
Commodities
The equity market rebound is linked to the rebound in commodity prices, especially oil, with both markets heavily correlated over the past 12 months or so.
Part of the reason for this is the dominance of oil and energy focused companies in markets such as the FTSE 100 e.g. Shell. BP, Glencore but part of this correlation is due to global investor sentiment spanning across all asset classes.
Oil has been a key factor here rallying about 50% to $40 per barrel from 12-year lows hit in mid-February. The rebound has been principally due to hopes for a limit to the current global over-supply with plans by OPEC (Organisation of Petroleum Exporting Countries) and other major suppliers, including Russia, to meet next month to discuss an output freeze in the hope they can support prices.
With global investor sentiment much calmer, gold, which is a ’safe haven’ investment, has fallen in price moving back towards $1,210 per ounce. The price of gold has not been helped by the strengthening dollar (see below).
Foreign Exchange & Interest Rates
Last week, comments from several US Federal Reserve officials put investors on guard for the possibility of at least two rate increases this year. This firmer interest rate outlook subsequently boosted the dollar. Some officials said another rate hike could come as early as next month if the economy maintained its momentum.
Commodity prices fell on the news.The latter are generally priced in US Dollars. In order to maintain their intrinsic worth, commodity prices tend to move inversely to the US currency.
Equities
S&P 500: 2030
Nasdaq: 4750
FTSE 100: 6150
Bonds – 10 Year Government Yields
US 1.90%
EU 0.20%
GB 1.45%
Foreign Exchange
EUR/USD 1.1100 (1 euro buys 1.1100 dollars)
GBP/USD 1.4200 (1 pound buys 1.4200 dollars)
Commodities
OIL: Brent: 39.00 (dollars per barrel)
GOLD: 1210 (dollars per ounce)
Receive fortnightly Market Update notifications by ‘Following’ Opening City Doors on LinkedIn
https://www.linkedin.com/company/opening-city-doors
Paul McCormick
