Global Markets Update Monday 26 February 2018

Posted on 26 Feb 2018

Minutes of the Federal Reserve’s latest rate-setting meeting revealed that policymakers were increasingly confident about the outlook for the US economy. The news caused the yield on the 10-year US Treasury bond to approach the key level of 3%.

Global Market Update - 26-02-18

United Kingdom

The FTSE 100 slid 0.4% over the week.

In a week when Theresa May gathered the Cabinet to agree on the UK’s Brexit position, the Labour Party confirmed it would back staying in the custom’s union.

UK GDP growth for the final three months of 2017 was revised down to 0.4%, from an initial estimate of 0.5%. The revision was due to slower growth in production industries, and reduces growth over 204 to 1.7%, the weakest since 2012.

Output per hour rose 0.8% in the final quarter of 2017, after growth of 0.9% in the previous quarter. This is the strongest six months of productivity growth since the financial crisis.

Wages, excluding bonuses, rose by 2.5% year-on-year in the final quarter of 2017.

UK retail sales slowed to an annual rate of growth of 1.6% in January, compared to a rate of 2.3% in January 2017. This is the worst start to a year since 2013.

Public sector net borrowing fell to £37.7bn between April and January, down £7.2bn on the comparable period. It is the lowest figure for the period since January 2008.

Royal Bank of Scotland reported its first profit in 10 years.

Standard Life Aberdeen sold its insurance business to Phoenix Group for £3.24bn.


The S&P 500 gained 0.6% over the week.

Minutes from Janet Yellen’s last  FOMC meeting indicated a growing sense of confidence among policymakers over the outlook for the economy and inflation, fueling speculation that the US central bank could adopt a more aggressive policy stance than had been expected.

Shares of Walmart tumbled after it said it had suffered a sharp slowdown in its hitherto fast-growing online business.


The MSCI Europe ended the week with flat returns.

Minutes of the ECB’s January monetary policy meeting reveal that policymakers are concerned about the euro’s strength/dollar’s weakness and are considering a change in the bank’s communications, arguing economic conditions were now strong enough to drop a commitment to boost the quantitative easing programme in the event of a slowdown.

Purchasing managers’ indices for the eurozone’s two largest economies slipped in February. In Germany, the gauge slipped to a three-month low of 57.4, down from 59 in January, while in France the index fell to a four-month low of 57.8.

Eurozone inflation slid to a year-on-year pace of 1.3% in January, down from 1.4% in December. However, core inflation picked up to an annual rate of 1.0%, compared to 0,9% in December.

The European Commission’s consumer confidence indicator dropped in February, its first decline in seven months. This follows a bumper reading in January.

Germany’s economy grew by 0.6% in the final quarter of 2017, driven by strong export growth. This compares to an expansion of 0.7% in the third quarter of the year.

The Ifo index of German business sentiment slipped to 115.4 in February, from 117.6 in January. The data is consistent with other German data metrics which point to a slight moderation in growth recently.

German producer prices grew by a stronger-than-expected 2.1% on a year-on-year basis in January. However, the data was weaker than the 2.3% rate record in December.

The ZEW indicator of German economic confidence slipped more than expected in February, coming in at 92.3. However, this is still the second-highest reading on record.

Swedish inflation fell to 1.7% in January, its lowest level since last March, and moving away from the central bank’s target. The news was seen to lessen the chances of a rate increase in Sweden.


The Nikkei 225 rose 0.8% over the week.

The Nikkei-Markit flash manufacturing purchasing manager’s index edged lower to 54 in February, down from 54.8 in January as output and new orders increased at a slower rate.

Japan’s exports rose 12% on a year-on-year basis in January, the fourteenth consecutive month of growth, due to higher shipments to Asia and western Europe, according to the Ministry of Finance.

Pacific Basin

China appears to be ready to remove the two-term limit on its presidency, opening the way for Xi Jinping to serve beyond 2023.

China's insurance regulator is to take control of Anbang Insurance Group for one year in an effort to guard against excessive risk taking.

Thailand’s economy grew by a weaker-than-expected 4.0% on a year-on-year basis in the final quarter of 2017, according to the Office of the National Economic and Social Development Board. In other news, the country’s exports grew 17.6% on a year-on-year basis in January, the fastest rate in more than five years, while import growth also came in above estimates.

Emerging Markets

Index provider MSCI has proposed adjusting the weighting of companies in its global indices to reflect the proportion of voting power held by freely floating stock. The proposals would cut the weighting to Latin American markets (where preference shares, which do not carry voting rights, have long been commonplace) from 13% to around 10% and increase the weighting to Asia in the widely used EM index to over 75%.

The Czech economy grew at a year-on-year rates of 5.1% in the final quarter of 2017. Other central and eastern European economies are also benefitting from stronger growth in the eurozone: Poland recently reported its strongest annual growth rate for six years, while Romania’s gross domestic product increased by 7% 2017.

S&P lifted Russia’s credit rating to investment-grade status, citing the country’s “prudent policy response” that has put its economy on more stable footing, despite lower commodity prices and international sanctions.


The 10-year US Treasury bond yield reached a fresh four-year high of 2.957% as minutes of the latest FOMC meeting raised concerns of a more aggressive policy stance from the Fed, before closing the week at 2.87%. US 10-year real yields rose to their highest level since September 2013, indicating that investors anticipate rising interest rates. The yield on the two-year US note ended the week at 2.24%.

The 10-year German Bund yield ended the week at 0.71%, while the 10-year Gilt yield closed at 1.52%.


The Swedish krona fell to its weakest level in more than a year as the Riksbank’s latest policy meeting suggested it may postpone its plans to start lifting interest rates.