Q1 ends with a solid start to the year for most asset classes.

Equity markets have had one of the best starts to the year for many a year in response to the Federal Reserve and the Bank of China’s adjusting their policy stance at the beginning of the year. It has been a pretty good start for most asset classes. Bondholders have benefitted as inflation expectations have been falling, the oil price has rallied after the falls towards the end of last year. Gold investors have also profited as bond yields have fallen.

What can we look forward to for the next quarter? China trade talks are continuing as a conclusion to those negotiations will have an impact. The upcoming quarter's economic data will likewise impact investor sentiment. If one takes an optimistic point of view, from a pretty low base, the recent data out of Europe has improved, but serious structural issues still exist, German Bund yields tell you that. As much as Germany cracks the whip when it comes to the rest of Europe, the German authorities are in the process of trying to organise the bailout of two of their banks, despite it being in direct contradiction to European policy. US economic data remains a mixed picture; however, the economy is still expected to grow in line with the trend. China’s prime minister, Li Keqiang, this week painted a picture of the global economy something akin to the curate’s egg, good in parts.

Astra Zeneca this week raised 3.5 billion dollars via an equity raise, for a collaboration with a Japanese drug company, this is despite the fact that debt is cheaper than equity. Astra’s balance sheet may be a little stretched, but the fact that it did raise equity rather than debt did raise a few eyebrows as to what the capacity is for new corporate debt amongst investors.

Brexit will continue to influence sentiment, not only over here but across the globe. It will be interesting to see what happens to sterling on Monday trading as the possibility of a no deal and a general election loom its head once again. With one opinion poll giving Jeremy Corbyn a five-point lead in the polls. Perhaps those who want Mr Corbyn should look at the latest reviews of Venezuela on trip advisor.

They are looking to the week ahead, as usual, there is a range of economic indicators for the US economy. The March jobs report at the end of the week as the number of new jobs created will be of keen interest. We get earlier in the weekly retail sales for February and the Institute for Supply Management manufacturing Index. China trade talks resume this week as well. Minutes of the ECB’s last meeting may shed some light onto the members view on the current state of the economy. As for the UK economy, the manufacturing and services purchasing indexes will be the focus.

 

Posted on March 31, 2019 .