News & Analysis

Weekly Summary – Trade Hopes

April 5, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

After a first-quarter rally driven by dovish central banks and trade optimism, global growth concerns crept into the financial markets towards the end of March and set a watchful tone for the second quarter. Despite signs of a slowing global economy, global stocks posted the best quarter since 2010.

Flashing red signals dampened risk sentiment, and investors are looking for reasons to push the rally further.

Purchasing Managers’ Index (PMI)

The PMI figures is an important indicator of business conditions and the overall economic condition of a count. The data released on Monday had set a positive tone for the week. Chinese economic activity bounced back from a contractionary level below 50 to rise to 50.8 in March. ISM Manufacturing PMI figures also improved to 55.3 in the US.

The PMI data of the world two largest economies were upbeat enough to calm investors’ nerves about the heightened concerns of the deepening slowing global growth.

Reserve Bank of Australia (RBA)

After the surprise dovishness from the RBNZ, traders were keen to see if the RBA echo the same comments. We did not see the same actions, but the tweaks in the language were dovish enough to put pressure on the local currency during the week. The main differences in words were for the labour market and the switch from “should” to “is expected” to see some further lift in wages have raised concerns on the gradual process of the increase in wages.

Brexit

Brexit remains chaotic and the UK Parliamentary vote at the start of the week was disappointing as none of the alternative motions got a majority.

  • Motion C: Committing the government to negotiating “a permanent and comprehensive UK-wide customs union with the EU” as part of any Brexit deal. 
  • Motion D: Referred to as Common Market 2.0, this option would mean joining the European Free Trade Association and European Economic Area. 
  • Motion E: Calling for a confirmatory referendum, giving the public a vote to approve any Brexit deal passed by Parliament before it can be implemented. 
  • Motion G: Aiming to prevent the UK leaving without a deal, including a vote on whether to revoke Article 50 – stopping Brexit altogether – if the EU does not agree to an extension.

The week progressed with the news that Theresa May will hold constructive talks with the Opposition Party.

Equity Markets

The equity markets held well given how the bond markets rattled the financial markets last week. PMI figures and hopes of progress on trade negotiations helped equities to remain mostly in positive territory.

The US stocks rose to almost six-month high during the week as manufacturing data was reassuring and at the same time, economic data releases were soft which will keep the Fed on the side.

In Asia, the rally in the first quarter reached a peak where investors await the next catalyst to push equities higher. As if writing, the performance in Asia on Friday morning was mixed.

FX Markets

In the currency markets, the US dollar was mostly higher against nearly all G10 currencies.

The Antipodeans were under pressure following dovish tones and elevated growth concerns from the Reserve Bank. However, the Aussie Dollar managed to recover from the better-than-expected trade balance and Retail Sales figures.

The British Pound remains volatile due to the Brexit jitters and directionless with a Brexit deadlock. As of writing, the GBPUSD pair consolidated in a tight range ahead of the Nonfarm payroll which could be the next key driver for the pair.

The Euro edged higher against the US dollar despite the latter consolidating gains. PMI and Retail Sales figures were upbeat and supported the Euro. However, overall data in the Eurozone is uninspiring which put pressure on the shared currency.

Commodities Markets

In the commodities market, the oil markets were supported by the recovery in the stock markets and reduced fears on global growth. Trade optimism was also a bullish driver of oil prices. However, this week oil reports were bearish and put downside pressure on WTI and Brent Crude. Towards the end of the week, oil prices pared some gains.

UKOUSD and USOOSD (Hourly Chart)

 
Source: GO MT4

Cryptocurrencies

Cryptocurrencies rallied this week with no clear drivers behind the upsurge. Bitcoin climbed above $5,000 before trimming some gains. It is currently trading in the $4,900 range.

BTCUSD (Hourly Chart)

Source: GO MT4

Monday, 08 April 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.055 0 0.057 0.029 0 0 1.487
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
20.403 0 0 0 0 0 0