In a week that had plenty of news to digest, the developed equity markets of the US, UK and Europe ended the week slightly higher than they started. This was despite the increased tensions between East and West as President Putin brought Crimea back under Russian control, resulting in President Obama imposing sanctions on Russian Oligarchs. The Vix rose slightly on Friday, but fell modestly on the week overall. The imposing of sanctions led to the credit rating agencies of Fitch and the S&P both cutting Russia’s rating to negative. Russian 10-year sovereign ruble bond yields rose to 9.66%, the Ruble itself continued to decline. It is a possibly a little surprising that so far, most asset class’s performances have seen little impact from the fall out over the Ukraine. One can expect more headlines on Monday as the G7 are holding an emergency meeting to discuss the ongoing situation in the Ukraine.
In the past week the US data continued to show modest improvement over expectations, whilst inflation remained subdued. Janet Yellen, the new Fed Chair, was accused of making a gaffe at Wednesday’s press conference, as she indicated that the Fed believed the first US interest rate rise will come this time next year. Yields on 10-year US treasuries rose slightly but remained pinned around the 2.75% mark. UK 10-year gilt yields continue to track close to US treasury yields, closing the week at 2.74%. The US dollar rallied modestly against its basket of other currencies, the gold price, which looked like it might break back above $1400 an ounce at the start of the week, finished the week lower at $1331. Commodity prices continue to weaken on China concerns. Despite the continued tensions with Russia, so far the oil price has seen limited reaction.
In Europe, one event that seemed to raise little in the way of headlines was the increased unrest in Spain as protestors took part in a so-called “March for Dignity”. This was the first major anti-austerity demonstration in Madrid for several months. Unemployment in Spain remains uncomfortably high at 26%, despite some improvement in the economy.
The focus will soon turn in the following weeks to the start of the first quarter reporting season. The curtain raiser to the reporting season, Alcoa, announces Q1 results on the 8th April. For the more immediate future, the tone for the week may be set on Sunday night as the Chinese report the March manufacturing flash PMI. Expectations will be for an improvement on the previous number of 48.5, which some consider was partially impacted by the events of Chinese New Year. We will also see similar releases on Monday for the Eurozone and the US. On Thursday we get the final US GDP growth rate for Q4 2013.
It is reasonably eventful week in the UK as well, after last weeks headline making budget announcements. The announcement that will probably gain the most attention will be Tuesday’s inflation data, where there has been speculation in the weekend press that the rate of inflation will continue to fall below the Bank of England’s 2% target. On Friday we get to hear the final Q4 2013 GDP growth rate.