Global equity markets moved higher last week despite mixed economic data and little sign that the Greek situation will be resolved in a straightforward way. Also, the US have stepped up rhetoric against Russia’s influence in the Ukraine, favouring a more aggressive way of dealing with Putin than the current European approach of talking, led by Germany and France.
After a weak January, the major US indices outperformed last week. The S&P 500 was up 3.03%. Friday’s better than expected US payroll data weighed on government bonds and gold with the market bringing forward expectations of a rate hike from the US Federal Reserve. The US 10-year yield jumped 12bps on Friday alone to end the week at 1.94%.
European equity markets have opened sharply lower this morning after a weak session in Asia overnight. A surprise drop in Chinese exports, declining by -3.3% in January versus an expected growth rate of 4%, is fuelling concern that the slowdown in China’s economy is deeper than expected. On Friday, the preliminary estimate of Eurozone fourth quarter GDP will be keenly watched, with expectations calling for an increase of 0.2% over the previous quarter. The Bank of England’s quarterly inflation report will provide the monetary policy committee’s latest economic projections, a useful update as investors try to gauge the timing of rate hikes. There are also updates on industrial production from around the globe, while the Greek drama will likely cast a shadow over markets. Now the Greeks are reminding Germany of their Nazi past and the debt forgiveness that followed in the years after the war, demanding to be paid reparations for WWII. It’s getting messy!