Gerald Fitzgerald’s Market Review April 15th

LAST WEEK IN 30 SECONDS...

Markets generally moved sideways last week with investors awaiting finalisation of the much discussed trade talks between the US and China, along with a pause in advance of Q1 earnings disclosures from global companies. Global bonds ticked higher from recent lows with the German 10-year bond yield up +0.05% over the week.

The EU agreed to extend the UK’s Brexit deadline to the 31st October, or earlier if the UK can get Commons agreement to progress an exit strategy that’s longer than Elton John’s farewell tour. Meanwhile, with the European elections looming the UK has a new political group called the “Brexit Party”. Despite the political noise, Sterling has strengthened against the Euro by 3.8% over the year to date.

THIS WEEK IN 30 SECONDS...

Q1 earnings season disclosures ramp up this week with over 1,300 company announcements, including Citigroup and Netflix whose business faces increasing competition from Apple and Disney. With forecasts of potential falls in Q1 earnings for US domiciled S&P 500 companies, the next couple of weeks will prove a key guide as to the health of the global economy.

From a data perspective, Eurozone inflation metrics for March are due for release on Wednesday with US retail sales and PMI manufacturing data out on Thursday.

EURO INFLATION JUNKIE

Like the ongoing opioid crisis in America, the Eurozone appears to be suffering from withdrawal symptoms as the European Central Bank (ECB) attempts to wean the economy off cheap credit. The ending of QE in 2018 has seen inflation expectations fall to fresh lows last seen in 2016. With a target level of just under 2%, the current level of 1.37% suggests another stimulus shot is needed. The ECB needs to be cautious, however, as stimulus addiction could be detrimental.