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Gerald Fitzgerald’s Market Review December 4th

04 December 2018

 

 

LAST WEEK IN 30 SECONDS...

Global markets surged last week fuelled principally by US Federal Reserve chairman Jerome Powell indicating US interest rates were just below neutral levels, a comment which saw global markets gain 3.4% over the week.

Data releases from Eurostat indicated headline Eurozone inflation was 2.0% in November, down from 2.2% the previous month. Core inflation, which ignores energy and food price variability stood at 1.0%. Eurozone government bond yields traded lower with German bunds now 0.12% lower than at the beginning of the year.

 

THIS WEEK IN 30 SECONDS...

Investors are closely analysing the truce in the ongoing trade tariff dispute between the US and China. Whilst markets initially reacted positively on Monday, that reaction was short lived with markets reversing much of those initial gains. Investors will look to both the US and China for further reassurance that the weekend’s truce at the G20 summit was more than just another photo opportunity.

From a data perspective US employment metrics are due for release on Friday.

 

US YIELD CURVE FLATLINING

The US Yield curve has risen at lower maturities on the back of rate rises by the US Federal Reserve. This has pushed the shorter-term part of the curve upwards and a flatter curve can be seen as per the orange line below. Generally, a more normal yield curve would be similar to the US yield curve back in 2003 illustrated in green below, where you are compensated more for longer term investments. A flatter or inverted yield curve is often associated with a pending economic slowdown or recession.