Gerald Fitzgerald’s Market Review February 18th

LAST WEEK IN 30 SECONDS...

Global equities shook off wider growth concerns last week returning a strong +2.80%. This followed tentative agreement between the Democrats and Donald Trump on the much-publicised budget and security impasse. Elsewhere, indications that the US may be willing to hold off escalating Chinese trade tariffs to help progress ongoing trade discussions was received warmly by markets.

Within the Eurozone, German 10-year government bonds ticked marginally higher whilst the Italian bond yield see-saw continued with yields falling -0.18% over the week, not before the bonds yielded 3.00% at one point however.

THIS WEEK IN 30 SECONDS...

This week it is the turn of Chinese representatives to go to Washington for ongoing trade discussions before the 1st March deadline. The US Federal Reserve minutes are due for release on Wednesday with close attention being paid to whether the Fed will pause interest rate hikes or continue to target some increases over 2019.

From a data perspective US PMIs, Eurozone PMIs and Eurozone inflation figures are due for release. Elsewhere, credit rating agency Fitch is due to announce the outcome of Italy’s credit rating review on Friday.

ITALIAN GOVERNMENT BOND ROLLERCOASTER

The spread in yields between German and Italian government bonds surged in May 2018 with the formation of an Italian populist coalition government. Italy’s 2019 budget discussions with the European Commission saw Italian yields spike further. More recently, this spread has narrowed with positive investor demand for the higher yielding Italian bonds. Upcoming reviews of Italian debt by the major credit rating agencies, however, may see further volatility within this space.