Weekly Market Recap: April 20th 2015

Market Recap

After stellar performance the previous week, most of the major global equity indices closed in the red last week. European equities were hardest hit with the German DAX index falling 5.54%. There wasn’t anything particularly noteworthy to explain the decline, other than financial market participants waking up to the Greek crisis. The Greek 2-year government bond yield rose sharply, closing the week at a yield of 26.51%. Adding to the unease on Friday, after Chinese equity markets closed, was the announcement by the Chinese regulator to clamp down on speculative leverage via margin trading rules. The Shanghai Composite was one of the best performing equity indices last week, up 4.56%, after weak economic data prompted speculation of looser monetary policy from the People’s Bank of China. The German 10-year yield halved last week, down from 0.16% to a yield of 0.08%. The Euro edged higher on the week against the US dollar, to a rate of $1.077, while the price of Brent crude oil shot up 9.90% to close at $63.71 a barrel.

Outlook: Week Ahead

European equity indices are higher despite a mixed session in Asia overnight that saw China’s Shanghai Composite Index decline by -1.64%, after Friday’s announcement by the regulator on tighter leverage rules. The decision by China’s Central bank to cut to the reserve requirement ratio for banks by 100bps was not enough to stop shares moving lower.

On the macro front this week there are key reports on inflation, retail sales and industrial production. The flash PMI surveys from Europe, the US and China will provide some insight into what we can expect in the second quarter from these economies. The Greek drama is beginning to create some fear again in financial markets, with little leeway coming from the IMF and the Germans. There is a sense that Europe is now prepared for a Greek exit from the Euro, although I’m sure Mario Draghi and the ECB will be looking to avoid such a scenario, which could erode the credibility of an institution that has fought hard to save the Euro.