Global Markets Update Monday 9 April 2018

Posted on 09 Apr 2018

Global stockmarkets remained volatile reflecting the evolving story of the trade war between the US and China.

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United Kingdom

The FTSE 100 rose 1.8% over the week.

IHS Markit purchasing managers’ index of manufacturing activity crept higher to 55.1 in March, up from 55 in February. However, surveys of services and construction activity weakened, reflecting the impact of the extended spell of cold weather. The service sector purchasing managers’ index fell to 51.7 in March from 54.5 in February, and the lowest reading since immediately after the EU referendum. Meanwhile, the construction purchasing managers’ index dropped from 51.4 in February to 47.0 in March.

US

The S&P 500 ended a volatile week with losses of 0.2%.

Donald Trump ordered his administration to put together a plan for an additional $100bn in tariffs on imports from China, escalating a trade fight with Beijing that has unnerved financial markets around the world.

In his first speech as Fed chair, Jay Powell subdued wage growth suggested the US labour market was not “excessively tight” and endorsed a “patient” approach to raising rates.

The US economy added a lower-than-forecast 103,000 jobs in March. However, data for February was revised higher to 326,000, taking the average monthly job gains over the first quarter to 202,000. 

The unemployment rate held steady at 4.1%, but average hourly earnings increased to 2.7% on a year-on-year basis, up from 2.6% in February. 

The ISM non-manufacturing purchasing managers’ index slid to 58.8 in March, down from the 59.5 recorded in February and the weakest reading in three months.

The ISM manufacturing purchasing managers’ index slipped to 59.3 in March, down from 60.8 in February.

Europe

The Eurofirst 300 gained 1.1% over the week.

German industrial production slumped 1.6% in February, the sharpest monthly fall since August 2015.  

Eurozone retail sales rose just 0.1% in February. This followed a worse than previously thought performance in January, when sales dropped 0.3%. In Germany, retail sales fell by 0.7% in February, compared to an expected gain of 0.6% over the month. This left sales up by 1.3% on the year, below the 2.2% rise that had been expected.

Headline eurozone inflation rose 1.4% in March, up from 1.1% in February. Core inflation held steady at 1.0%.

The eurozone composite purchasing managers’ index slid to 55.2 in March, slightly below the flash estimate of 55.3 that was previously issued. In particular, growth in Germany’s services sector faltered, with business activity rising at the slowest rate for seven months, while new orders and employment also struggled.

New factory orders in Germany rose by a weaker-than-expected 0.3% in February. This is the latest sign that growth in the eurozone’s biggest economy may have eased in the first quarter of this year.

Japan

The Nikkei 225 rose 0.5% over the week.

The Tankan index of business sentiment for large manufacturers fell two points to 24 compared with a median forecast of 25, in the first three months of the year. This is the first fall in two years.

The Nikkei manufacturing purchasing managers’ index fell to 53.1 in March, down from 54.1 a month earlier.

Real cash earnings fell 0.5% in February, according to data from the Ministry of Health, Labour and Welfare. Household spending fell 0.9% year on year in February, weaker than the 0.3% rise that had been expected.

Pacific Basin

China threatened to impose tariffs on $50bn of US imports, including soybeans, aircraft and cars.

China’s official purchasing manufacturing index rose to 51.5 in March, up from 50.3 a month earlier, but the Caixin China purchasing managers’ index dipped to a four-month low of 51.0, from 51.6 in February.

The Nikkei Taiwan manufacturing purchasing managers’ index was at 55.3 in March, down from 56.0 in February and the lowest level in five months.

South Korea’s manufacturing sector contracted for the first time this year in March as the number of orders from domestic and overseas markets fell. The Nikkei-Markit South Korea manufacturing purchasing managers’ index declined to 49.1 in March from 50.3 in February. The reading was at its weakest level since July 2017.

Emerging Markets

India’s central bank has held its benchmark interest rate steady at 6%, but sharply reduced its predicted inflation rates for the new financial year at its bi-monthly policy meeting.

Bonds

The 10-year US Treasury yield closed the week at 2.83%, while that on the 10-year German Bund fell closed at 0.52%.

Commodities

Agricultural commodities, particularly soyabeans and corn, fell sharply after China unveiled retaliatory trade tariffs following further measures announced by the Trump administration .