After a week that saw equity prices come under pressure as Trade tariff concerns continued to dominate investor headlines. On Friday an announcement that OPEC will increase oil production, modestly, saw a sharp reversal in fortunes, particularly in Europe. The FTSE 100 greater exposure to oil stocks led to an outperformance of this index relative to other major developed markets, particularly the US ones. This recovery resulted in the FTSE 100 gaining on the week, US equities and European lost ground, despite Friday’s rally. Sentiment had become quite negative towards equity markets and possibly enough for the oil story to provide the catalyst for some bear closing. To be fair there were some other pieces of economic news within the eurozone to help equity sentiment. The eurozone composite purchasing managers index rising in June for the first time in five months. Greek bond yields fell after the country’s eurozone creditors pushed back repayment deadlines on nearly 100 bn euros of bailout loans.
Brexit came back into the headlines on Friday as Airbus claimed there may be severe consequences for the UK withdrawal from the EU forcing the company to leave Britain. The front page of Saturdays’ Financial Times leads with the story, and there is commentary throughout the paper suggesting that this is a tangible example of the impact a bad or no deal Brexit could have on the UK economy. One point that has not been made by any journalists is, Airbus is owned by EDAS, which in turn is 25% owned between the French-German and Spanish governments. Should one be a cynical individual it could be suggested these comments have some political influence.
Trade concerns will continue to dominate equity sentiment in the coming week, which remains cautious, however, there are plenty of other noteworthy economic events. For the US we get the final estimate for QI economic growth. We also get Durable goods orders for May and the final reading for the Michigan Consumer confidence. Investors will also be keen to see the latest official Chinese Purchasing Manager surveys. The UK will also publish its final estimate for Q1 economic growth and business investment. For Europe flash inflation on Friday for June. On Thursday we get some indicators for economic sentiment within the euro area, in the form of industrial and economic sentiment for June. Sentiment has been dipping in the past few months. At the end of the week, the euro summit and Brexit is likely to come back into the headlines.