Markets update: Time for a downturn?

Markets advance and equities finished the week on a high as the Fed confirms its readiness to protect against any potential downturn, writes Ian Slattery.

A sharp rally on Friday ensured equity markets finished the week higher. The move came after reassurances from Federal Reserve chairman, Jerome Powell that underlying economic fundamentals remain solid, while confirming they would not hesitate in using the tools at their disposal to protect against an economic downturn.

Powell’s comments were timely after a profit warning from Apple and the disappointing ISM manufacturing release heightened concerns amongst investors of slowing economic growth. Meanwhile, the Peoples Bank of China (PBOC) have already stepped in with targeted stimulus, cutting the amount of cash banks must hold by one percentage point, which they anticipate will free up 800 billion yuan (circa $117 billion) for lending.

Equities

The MSCI World Index advanced 1.1%, with the US, Europe and the UK all registering gains, while Asian indices weighed. Smaller cap benchmarks enjoyed the strongest gains after suffering the largest losses in 2018.

Fixed Income & FX

The US 10-year yield ticked lower to 2.65%, as investors sought US safehaven assets despite the move higher in equities. The Euro declined against most major currencies with EUR/USD at 1.144 and EUR/GBP at 0.898.

Commodities

Oil prices rose to $48.92 with supply cuts and optimism around trade negotiations outweighing swelling US supply. Gold moved higher to $1,291 per troy ounce, while Copper continued to decline amidst economic growth concerns to $5,897.

THE WEEK AHEAD

Monday 7^th January:

• Eurozone Retail Sales
• US Factory Orders

Wednesday 9^th January:

• US FOMC announcement
• Eurozone unemployment

Friday 11^th January:

• UK monthly GDP