Global Markets Update Tuesday 3 April 2018

Posted on 03 Apr 2018

Global stockmarkets recovered some ground over a shortened week, although tech stocks continued to be volatile.

A surge of deals in the final week of the quarter meant that global M&A activity has now passed $1.2 trillion, a new record.

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United Kingdom

The FTSE 100 rose 1.9% over the week.

The GfK index of UK consumer confidence rose three points to minus seven in March as progress on Brexit and higher levels of employment prompted a rosier outlook, despite the extremely cold weather.

Melrose Industries bought GKN for £8 billion.

CME Group bought UK fintech company Nex for $5.4 billion.

Japan’s Takeda Pharmaceutical indicated interest in buying UK-listed Shire for $40 billion.

US

The S&P 500 gained 2.0% over the week but fell 1.2% over the first quarter – its first quarterly loss since 2015.

Faang stocks suffered their worst one-day loss as a group on Tuesday. Concerns over the possibility of heightened regulation surfaced following reports that Facebook founder Mark Zuckerberg was willing to testify before the US Congress over a data privacy scandal. Chipmaker Nvidia also fell sharply after it confirmed it had temporarily suspended self-driving cars on public roads following the fatality involving an Uber vehicle.

US economic growth slowed less than previously estimated in the fourth quarter, expanding at a rate of 2.9% compared to a previous estimate of 2.5%.  Surging consumer spending offset the drag from higher imports. 

The core personal consumption expenditures price index, the Fed’s preferred measure of inflation, rose 1.6% year-on-year in February, the largest increase since April 2017.

Personal income and personal spending were up on the month by 0.4% and 0.2% respectively in February.

The University of Michigan consumer sentiment index rose to its highest level since since 2004 as a solid labour market and growth expectations offset concerns about tariffs and stock-market volatility.

US consumer confidence declined for the first time this year in March. The index fell to a lower-than-expected 127.7 from February’s figure that was the highest since late 2000.

The ISM Chicago’s purchasing managers' index of factory activity in the mid-West declined to 57.4 in March from 61.9 in February, and its slowest pace in more than a year.

Canada’s GDP unexpectedly contracted 0.1% in January amid a sharp drop in oil production.

Europe

The Eurofirst 300 rallied 1.5% over the week.

Japan

The Nikkei 225 jumped 4.1% over the week.

Retail sales rose a smaller than expected 1.6% year on year in February.

Pacific Basin

Chinese officials stepped up efforts to smooth fears of a trade war with the US. This included suggesting loosening foreign investment restrictions and offering to buy more semiconductors from the US. US Treasury secretary Steven Mnuchin also said he was hopeful an agreement between Washington and Beijing could be reached on trade.

Emerging Markets

Turkey’s economic growth more than doubled last year to 7.4%, driven by consumer and government spending that offset a slowdown after a failed coup. The rapid expansion has led to warnings that it will lead to higher inflation and a deepening current-account deficit.

Brazil’s central bank eased reserve requirements for the banking sector to try to boost liquidity as the country’s economy slowly climbs out of recession. It follows last week’s interest rate cut to a record low.

South Africa’s central bank cut interest rates by 25bps to 6.5%, their lowest level in two years.

Bonds

The benchmark 10-year Treasury yield broke out of a long-held trading range to touch 2.74%, its lowest level since early February. Yields on 10-year German Bunds fell to 0.5%.

The difference between 10- and two-year Treasury yields fell to under 50 bps, one of only three times since the start of the economic recovery that the gauge has reached such a low level.