Global equity markets sold off sharply last week as investors were spooked by plunging commodity prices and events in the high yield bond market, made worse by the impending rate hike from the US Federal Reserve.
The sell-off in equity markets intensified on Friday to cap off a miserable week for equity market investors. In Europe, the FTSE Eurofirst 300 closed down –4.14% while the German DAX index fell -3.83%. In the US, the S&P 500 index fell -3.79% while the tech-heavy NASDAQ Composite fell -4.06%. In Asia, Japan’s Nikkei 225 index fell -1.40%, while China’s Shanghai Composite Index of mainland shares fell -2.56%.
As volatility surged and shares were dumped, money flowed to the perceived ‘safe haven’ of government bonds, pushing yields lower. The US 10-year treasury yield dropped 8bps to 2.16%, while the German 10-year bond yield fell 3bps to 0.54%.
European equity markets have opened marginally higher, despite a mixed session in Asia overnight. It is a busy week on the macro front this week. In Europe there are reports on industrial production, employment, trade, inflation and the latest ZEW Economic survey from Germany. There is a host of data released from the UK and the US including reports on retail sales, inflation and housing.
On the central bank front, the Bank of Japan will hold their monetary policy committee meeting on Friday, with no change in policy expected, but they may talk up the prospect of further stimulus. Of course, the US Federal Reserve’s much anticipated monetary policy meeting will be centre stage.
I am including a link to my article that appeared in the Sunday Business Post yesterday, with some thoughts on investment manager selection I have shared previously. The question is would you fire the investment equivalent of Jose Mourinho, a world class manager who has moved from top quartile to bottom quartile in the last year? (Link: macromarkets.ie>>>)