Weekly Blog 08/03/2019

Mike BaxterWeekly Blog0 Comments

Markets have staged an impressive rally in 2019, however, a gloomy message from ECB President Mario Draghi has sent equities lower. In the message, the ECB gave a sobering forecast of its expectations for eurozone growth, and gave the green light for a further issuance of monetary stimulus. Remarkably, with interest rates set to be lower for longer, Mr Draghi is likely to become the only head of the central bank to end his term without raising rates! As you would expect, the euro was off sharply on the news, European Banks led the equity slide and investors took risk back off the table.

Mario’s comments seemed to remind investors that Brexit (remember this?) is as omnipresent as ever, with the exit deadline getting closer and closer. The US-China deal which many believed, was as good as signed, sealed and delivered, has gone noticeably quiet suggesting that there remain areas of contention, particularly with a previously agreed ‘signing ceremony’ being postponed indefinitely. This will concern both sides, however, weak export data from China, down 20% in February compared to the previous year, highlights the challenges of the trade war and will fuel concerns of a slowdown in the 2nd largest economy.

Italy has become embroiled in frosty US-China relations following its endorsement of China’s aspirational infrastructure initiative ‘One Belt, One Road’, which quickly drew a reaction from Washington criticising the move and questioning the benefits that the Italian people would experience. Unpredictably, China shot back highlighting the independence of Italy and their ability to make informed decisions… This increasingly feels like a Tom & Jerry sketch…. I’ll let you decide which is which!

Markets in a minute

  • The FTSE 100 is down 0.36% this week.
  • The 10 year Gilt yield has fallen to 1.18%.
  • DS Smith was up strongly on Wednesday (+5%) as their Q3 trading update seemed to tick all the right boxes.
  • Tobacco companies were up on news that Scott Gottlieb, the US FDA commissioner, would be retiring. This exit was viewed as lowering the prospects for a menthol cigarette ban, which has recently dragged on performance.
  • Ashtead shares moved lower following their Q3 results. The release was positive, highlighting that the company continues to enjoy 15% organic growth in the US but investors marked it down for not raising their guidance numbers.
  • Admiral was down 4.5%, during a difficult market session, perhaps driven by lower growth in the UK motor division.

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