Global Equity Markets in Review

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Global Equity Markets in Review

Key Highlights

  • China-US trade talks rejuvenate global markets to mild rises
  • US economic data impacts its key import markets
  • Russia’s oil and gas deals keep EU markets on edge

US Markets climb higher on the back of optimism about trade talks with China

US markets saw an upturn as the NASDAQ rose 1.7% and the S&P500 hit 1.4% on the back of optimism about trade talks with China.  Energy rose 3% as OPEC production fell despite Saudi Arabia ramping up production. Nevertheless, macro indicators cooled the hot streak with data indicating retail sales for December fell 1.2% coupled with weak performance in credit protection insurance.

China resumes trade after a week of festivities injecting renewed optimism in international markets

This development came on the back of the Trump administration signalling its willingness to compromise on the US budget and trade talks with China. Sources within the administration indicated Trump’s willingness to extend the March 1st China trade talks deadline by 60 days to bolster business between the two countries.

Macro indicators were mostly positive as markets in the far eastern country remained focused on the trade talks with the US. Results indicated inflation rose to 1.7% which was below expectations and lending rose to 10.3%, up from 9.8% last month. Exports rose 9.11% in January against -3.32% last year and imports rose to -1.49% against -10.18% in the same period.

The Shanghai Composite dropped 1.4% to hit 2682 by end of the week, a surprise performance associated with the uncertainties of the trade talks as the flipside of the process impacts equity markets. This is still within the range of the all-time high of 6092 witnessed in October 2007 and the all-time low of 99.9 witnessed in December 1990.

Hong Kong’s equity markets also declined on the back of China’s economic results with the Hang Seng index down 1.9% to 27,900 points, with its Hang Seng China Enterprises index closing 2.1% lower.

European markets also finish higher

The optimism surrounding the US-China trade talks also warmed up European markets with a raft of reasonable earnings stimulating robust rises. Expectations of a new proposal to prop eurozone banks also contributed to the rally of stocks and markets in the EU zone which saw its best performance since November 2018. Germany’s index STOXX 600 recovered 3% week on week. However, China’s inflation data destabilized markets on Friday with the DAX dropping 0.6% and auto shares (BMW, Daimler, Volkswagen) suffering the most.

Britain’s FTSE continued to rise for a fifth consecutive session and the third week in a row as news from the China-US turned out more positive than expected, adding 0.6% on the back of rejection of the government’s latest Brexit deal.

Michelin performed well after second-half earnings before interest and taxes were better than expected due to improved production and good margins in the truck division. Airbus 2018 results were above expectations with an enhanced EBIT expected in 2019 when the production of its iconic A380 model comes to an end. Nestlé confirmed that year on year growth was still inching upwards and its revenue margins approaching 2020 targets. Heineken reported growth for the Carlsberg line and expected EBIT rise while AstraZeneca returned an 8% gain in sales during the fourth quarter due to the growing demand for its new products.

Japanese markets lower due to poor retail sales numbers

The China-US exuberance spread to Japan where GDP for the fourth quarter rose 1.4% in contrast to quarterly results that were lower than expected. The rise was attributed to higher consumer spending coupled with stronger capital expenditures and low unemployment.

However, the Nikkei index dropped in response to poorer retail sales results in the US with exporter-oriented sectors and financial stocks showing weak performance, sparking fears of an economic downturn. The Nikkei fell 1.1% to 20,900 on Friday despite rising 2.8% for the week.

Natural resources manufacturer Inpex shares rose 11.7% as earnings jumped, while pneumatic equipment expert SMC rose 10.6% on above-expected returns. However, traditional sectors such as real estate, agriculture, transport, and energy lagged behind.

Russian markets rising towards all-time highs

In Russia, the MOEX jumped 1.1% to reach 2488 points, up from 2461 and marching towards its all-time high of 2547 witnessed earlier this month. The bourse is expected to continue its upward trend for the next two quarters. This comes as oil output dropped about 35,000 barrels per day from October last year. However, fears of fresh sanctions and the country’s level of exposure lingered as the US and EU moved closer to backing new sanctions. The EU also concluded tighter regulation for Russia to Germany natural gas pipeline expected to cost $9.5 billion.

Global equity market performance

Source: Bloomberg, Yahoo

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