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August 2018

Monthly Market Summary

August 2018

US

The strong earnings report and better than expected economic data prevailed over the trade war hysteria in the markets. A year on year increase of 6.6% in retail sales, a strengthening labour market with 213,000 new non-farm jobs created. Also, a stable Purchasing Managers Index (PMI), indicated rising consumer sentiment and business confidence in the US economy. The GDP rose by 4.1% in the second quarter, with inflation sitting at 2.9% which was above the Fed’s target and in the process making a case for rate hikes. The second quarter earning figures came out very strong with a majority of the companies beating estimates. Over the month the S&P gained 111.34 points (+4.12%), the Dow was up by +5.19% (1253.66 points), and the benchmark US Small Cap Index Russell 2000 was up by 29.07 points, a gain of 1.77%.

UK

BREXIT uncertainty remains the core concern of the UK markets. However,  investors are hopeful that by the end of the year things will be much clearer about the type of BREXIT the UK is likely to have. The recent data suggested that the UK economy is going through a temporary slowdown.  Nevertheless,  the manufacturing and service sectors remain positive with a strong labour market and an unemployment rate below 4.2%. Sterling fell against the USD, aiding the FTSE 100 to end the month up 1.46% (111.83 points), the FTSE 250 gained 46.9 points (+ 0.23%).

Europe

The Eurozone composite PMI dropped marginally to 54.3 from 54.9 in June. German manufacturing PMI showed increased activity despite the risk of increased tariffs on automobiles. The ECB kept the rates unchanged and signalled to maintain them until the first half of 2019 at least. Trade tensions weakened in the latter part of the month after the EU President visited Washington and held talks with the US Trade representatives. Euro Stoxx 50 over the month gained 4.4% (149.93 points), and EURO ended the month at 1.17 (+0.2%) against USD.

Emerging Markets

The Chinese markets were the most affected as both US and China intensified their trade dispute, with new tariffs imposed and threats to add further tariffs. Signs are building that the economic expansion is losing steam—from weakening investment in factories to anaemic household consumption and rising corporate defaults. China’s central bank has been pumping funds into the country’s financial system. The Yuan fell -2.9% against USD over the course of the month.

India remained the second-best performer for the month of July 2018, with a return of 6%. Brazil was the best performer with returns of 9%.

Source: JP Morgan Asset Management, Wall Street Journal and CNBC News

WEEKLY EQUITY MARKET UPDATE – 05/08/2018
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April 2018

Monthly Market Summary

April 2018

The volatility in March was mostly driven by the concerns of a Trade War between the two biggest economies in the world, namely the US and China. The month started with the hawkish tweets from Donald Trump signalling possible tariffs on imports, although the rhetoric toned down with the Europe managing to get an exemption from tariffs. The markets feared that any retaliatory measure from the Chinese side will dampen the trade and the hard-won growth momentum in the economy. The threat of the trade war became real when the Trump administration announced the tariffs on steel imports from China.

The market sentiment was further dampened by Fed’s interest rate hike, which was the first of its four-planned rate hikes this year and the sixth since it began raising interest rates in December 2015. The Technology sector took a major dip due to the risk of increased regulations after Facebook was found to have been involved in a user-data controversy linked to Donald Trump’s presidential campaign in 2016.

Summing it all up, markets in the month of March followed the high volatility trend it inherited from February 2018, depicting the phenomenon of “Volatility Clustering” which essentially means a period of high volatility is followed by another period of high volatility till a reversal or an inflection point is reached.

The major US markets ended the month in red with the Dow Jones Industrial Average losing 3.68 per cent, while the Standard & Poor’s 500 Index sliding 2.74 per cent and the NASDAQ Composite falling 2.90.

In addition to the global trade concerns, the BREXIT woes continue to haunt the UK markets. The FTSE 100 & FTSE 250 ended the month in negative 2.42% and negative 1.15% respectively.

Despite stronger earnings data in Europe, the markets succumbed to the pressure of increased tariffs and the resulting trade war. The STOXX 50 lost nearly 2% over the month.

The Nikkei 225 lost 2.04% this month, the Japanese bourse came under pressure from a stronger yen and global trade fears. It is also a major concern among investors that Japan can be the next target of US trade tariffs. The major emerging markets moved in concert with the developed markets, with the HangSeng losing 1.26%, the Shanghai Composite down by 2.05% and BSE Sensex fell by 3.43% in March.

Despite the increase in rates by the Fed, the Treasury yields fell in March due to the revised labour report, weaker than expected inflation data and the increased buying activity in the bond markets prompted by the volatility in equity markets as the investors looked for safer assets in the market. The 10-yr Treasury Yield ended the month at 2.741%, down 0.131 percentage points.

WEEKLY EQUITY MARKET UPDATE – 01/04/2018
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March 2018

Monthly Market Summary

March 2018

Fears of Trade War drive stocks down as the key US share indexes came under pressure in early hours of trading on Friday as President Trump in his tweets indicated of his plan to impose tariffs on steel and aluminium. The news pulled down the global markets amid the possibilities of retaliation from China and major economies and the consequent slowdown in global trade. The Dow finished up 0.3% as most of the losses were recovered in the later hours of trading. Regardless of the late recovery, the indexes witnessed one of the worst weeks this year. The DJIA, S&P 500 and NASDAQ posted their weekly figures of -3%, -2% and -1.1% respectively. The threat of an international trade war also sparked concerns in the fixed income markets as the companies may look to pass on the rise in cost from tariffs to the consumers. It is causing an increase in the expected inflation, leading to a rise in the yield of the 10 – year Treasury Note to 2.855% on Friday from 2.802% on Thursday. The Japanese equity was worst affected by the trade concerns as the steel industry and automakers bearing the brunt of the trade restrictions. The Nikkei ended the week at 21,181.64, a loss of 3.25 percent against the week earlier. The large-cap TOPIX Index fell 2.96 percent for the week and declined 6.01 percent YTD. The FTSE 100 index ended at 7,069.90, the lowest close since Dec. 23, 2016, according to FactSet data. No sector gained ground, and the basic materials group fell the most. For the week, the London benchmark fell 2.4%, a second straight weekly decline. The political risk in conjunction with the weaker economic prospects arising from inflation and a lack of real wage growth and the issues related to BREXIT has resulted in mounting pessimism towards UK equities. Emerging markets are likely to pay a heavy price as the proposed trade restriction will result in higher commodity prices in the international markets and the consequent fall in the local currencies. Emerging markets have witnessed an outflow of $5.8 billion of funds from non-resident investors last month, a report from the Institute of International Finance shows.
WEEKLY EQUITY MARKET UPDATE – 04/03/2018
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