Not a member? Register | Lost your password?

Weekly Market Focus 27 August 2018

Markets

WEEKLY FOCUS – FED Chair provides boost to risk assets                                27 August 2018

The annual meeting of central bankers at Jackson Hole, Wyoming is scrutinised by analysts for clues about the trajectory of monetary policy in the coming quarters. New FOMC Chair Powell indicated a likely rate hike in September as the economy remains on strong footing supported by constantly rising employment numbers and wage growth and there is no sign of inflation getting out of hand. He also acknowledged risk factors linked to emerging economies and indicated that a slowdown of growth internationally may warrant a change in policy dosage in due course. In a welcome break from his predecessors, Powell acknowledged that the Federal Reserve Bank had learned that inflation may show up in financial markets before general price pressures and that the central bank would do whatever it takes to control the problem if inflation becomes unanchored in either direction. This was music to the ears of financial indices and the S&P500 rallied to just over its all-time highs.    

 

The question which remains however is what will be the impact on the spread of long and short term US treasuries of further rate hikes as the 10Yr minus the 2Yr spread is already below 19 basis points. What impact will it have on the net interest margins of banks and hence growth sectors and will an inversion of the curve force the central bank to backpedal on its current hiking cycle? It seems that risk investors may benefit in both situations if the Fed chair indicated he will assess the situation dynamically.  

Meanwhile a survey of active fund managers shows that their exposure to the S&P500 remains bullish and individual investors are also in the same camp. Fund movements from ICI indicate positive flows going into defensive sectors.

The headwinds for risk assets may come from trade tensions and politics as NAFTA, China and EU talks may lead to greater volatility which is not necessarily an unwelcome situation by politicians in Mexico and the US who have elections to fight.

 

 

Value

Week

YTD

 

Value

1 week

Year to date

Equity Indices

 

 

 

S&P500

2,875

0.86%

7.52%

S. Africa

3,597

6.05%

-5.11%

FTSE100

7,577

0.25%

-1.43%

DAX

12,395

1.51%

-4.05%

CAC40

5,433

1.64%

2.26%

Swiss Mkt.

9,053

0.54%

-3.37%

FTSE MIB

20,742

1.60%

-5.09%

Shanghai Comp

2,729

2.27%

-17.47%

BSE Sensex

38,252

0.80%

12.32%

Nikkei

Major currencies

 

 

 

USDZAR

14.21

-2.95%

14.84%

EURUSD

1.16

1.61%

-3.13%

GBPUSD

 1.28

0.73%

-4.96%

USDCHF

0.98

-1.27%

0.91%

EURCHF

1.14

0.35%

-2.23%

USDJPY

111.23

0.66%

-1.30%

EURGBP

0.90

0.81%

1.85%

USDAUD

1.36

-0.20%

6.45%

Dollar Index

Commodities 

 

 

 

Brent

75.82

5.55%

13.38%

WTI Oil

68.72

4.26%

13.74%

Copper

2.70

2.86%

-17.71%

Aluminum

2,093.00

1.98%

-8.02%

Platinum

790.50

0.30%

-15.42%

Sugar

10.23

0.49%

-32.52%

Corn

348.50

-4.32%

-0.64%

Coffee

100.55

-0.64%

-20.32%

Gold

1,206.30

2.53%

-7.87%

Cotton

81.67

0.29%

4.08%

Sovereign Yields

 

 

 

US10Y

2.81

(0.05)

0.41

UK10Y

 1.28

0.04

0.09

Germany10Y

0.34

0.04

(0.08)

Contact: DBN +27 ( 0 ) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email:enquiries@pegasuswm.com
Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report
 

 



Twitter
Facebook
Connect with us