The deal is no deal, for now at least.
The hope that the worst of the conflict may be behind us helped stocks and bonds stage a decent recovery last week. The Nasdaq gained almost 5% in the past 5 days; for what it’s worth, all three major US indexes had their best week since November. The Nasdaq is up 10% since a recent low 11 days ago, signifying an exit from so-called correction territory. The FTSE 100 also gained a couple of per cent on the week. On Friday, the release of the US consumer price index for March showed prices rose 0.9%, unsurprisingly driven by increases in energy-related components. The 2-year US Treasury yield remained pretty much where it started the past week, suggesting that neither the Fed minutes nor concerns about higher energy costs changed the market’s expectations for the Fed’s actions in the coming months.
Equity and bond markets have worked in tandem over the past few weeks, and this is likely to remain the case whilst concerns persist about the risks that higher oil prices will influence growth and costs. The UK 2-year gilt yield finished the week at 4.25%, below the peak of a week or so ago, which was closer to 4.6%. Later this week, Andrew Bailey will deliver a speech at Columbia University, where he may offer insights into the Bank’s view of current events and how they may influence policy decisions in the coming months.
We also saw the impact that higher prices are having on American consumer confidence. The University of Michigan’s Consumer Sentiment Index dropped nearly 11% to a preliminary reading of 47.6, well below the forecast of 52.0, apparently the lowest level in the survey’s 74-year history.
This coming week, as much as the headlines will be on the hope that peace talks between Iran and the US will resume, investors’ focus will be on the start of the 1st-quarter earnings season, where expectations are high. According to FactSet, analysts estimate the year-over-year earnings growth rate for the S&P 500 in Q1 is 12.6%. JP Morgan usually kicks off the season with their results tomorrow, but Goldman Sachs seems to have snuck in ahead of them, reporting today. As always, Jamie Dimon’s thoughts on the current state of affairs will be keenly anticipated. He, along with Warren Buffet are probably the two most influential financiers of the modern era. On the economic front, we get the UK’s February 3-month average growth rate, which is forecast to rise to 0.3%, and Q1 GDP estimates for China. Also, this week in Washington, D.C., global finance chiefs gather to pontificate on recent developments, and we look forward to a series of platitudes from various finance ministers. Equity markets are starting the week in the red, and Brent crude trades around $100 a barrel as we wait to see whether negotiators can bring the parties back to the table.
Rory won his 2nd Green Jacket, poor old Justin Rose was the bridesmaid again, and Harry finished Friday bogey-bogey to miss the cut by a shot. Sport can be cruel.
