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August 2018

Monthly Market Summary

August 2018

US

The strong earnings report and better than expected economic data prevailed over the trade war hysteria in the markets. A year on year increase of 6.6% in retail sales, a strengthening labour market with 213,000 new non-farm jobs created. Also, a stable Purchasing Managers Index (PMI), indicated rising consumer sentiment and business confidence in the US economy. The GDP rose by 4.1% in the second quarter, with inflation sitting at 2.9% which was above the Fed’s target and in the process making a case for rate hikes. The second quarter earning figures came out very strong with a majority of the companies beating estimates. Over the month the S&P gained 111.34 points (+4.12%), the Dow was up by +5.19% (1253.66 points), and the benchmark US Small Cap Index Russell 2000 was up by 29.07 points, a gain of 1.77%.

UK

BREXIT uncertainty remains the core concern of the UK markets. However,  investors are hopeful that by the end of the year things will be much clearer about the type of BREXIT the UK is likely to have. The recent data suggested that the UK economy is going through a temporary slowdown.  Nevertheless,  the manufacturing and service sectors remain positive with a strong labour market and an unemployment rate below 4.2%. Sterling fell against the USD, aiding the FTSE 100 to end the month up 1.46% (111.83 points), the FTSE 250 gained 46.9 points (+ 0.23%).

Europe

The Eurozone composite PMI dropped marginally to 54.3 from 54.9 in June. German manufacturing PMI showed increased activity despite the risk of increased tariffs on automobiles. The ECB kept the rates unchanged and signalled to maintain them until the first half of 2019 at least. Trade tensions weakened in the latter part of the month after the EU President visited Washington and held talks with the US Trade representatives. Euro Stoxx 50 over the month gained 4.4% (149.93 points), and EURO ended the month at 1.17 (+0.2%) against USD.

Emerging Markets

The Chinese markets were the most affected as both US and China intensified their trade dispute, with new tariffs imposed and threats to add further tariffs. Signs are building that the economic expansion is losing steam—from weakening investment in factories to anaemic household consumption and rising corporate defaults. China’s central bank has been pumping funds into the country’s financial system. The Yuan fell -2.9% against USD over the course of the month.

India remained the second-best performer for the month of July 2018, with a return of 6%. Brazil was the best performer with returns of 9%.

Source: JP Morgan Asset Management, Wall Street Journal and CNBC News

WEEKLY EQUITY MARKET UPDATE – 05/08/2018
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July 2018

Monthly Market Summary

July 2018

The Trade war between the US and China intensified in June with President Trump announcing the updated list of Chinese goods worth $ 50 billion, that will be subjected to a 25 per cent tariff with effect from July 6. The Chinese side reacted by issuing a revised list of US goods worth $ 50 billion that will have a tariff imposed. The list targeted agriculture products particularly from places that supported President Trump during the US presidential primary elections. President Trump responded to this by threatening to impose additional 10% tariffs for another $ 200 billion worth of Chinese imports.

Equity funds suffered one of their largest weekly outflows during the last week of June, with $29.7 billion pulled out of risky assets over concerns of rising US protectionism and its likely effect on the global economy.

US equity funds lost $24.2 billion as per the EPFR data, outflows from emerging market (EM) equity and debt funds also increased as investors exited EM assets, citing the currency risks from a strengthening US dollar. Around $18 billion worth of funds exited EM equity and debt funds in June following an $8 billion outflow in May.

Around $ 3.9 billion was pulled out of European equity, and a net inflow of $ 2.6 billion was reported into Japanese Equity funds.

Among equity sectors, Technology has been the most resilient to trade worries, although threats to curb Chinese investment in US tech firms hit their stock value. Tech continued to draw the strongest inflows with $0.8 billion and was on a year-to-date total of $19 billion inflows while $9 billion has left all other sector funds.

In fixed income, investment-grade bond funds saw strong inflows of $2.9 billion as investors fled to safety, while high-yield bond funds saw outflows for an eighth consecutive week, with $2 billion removed.

The UK employment figures came out positive, as the latest figures signalled falling unemployment with falling wage growth. The Bank of England postponed its rate hikes and decided to leave the interest rate levels unchanged. The FTSE 100 index lost 41 points over the month and ended at 7636.93. The weakness in sterling against the dollar helped FTSE produce local currency gains as the foreign currency revenues were repatriated.

The concerns of an exit of Italy from Eurozone eased after the new government showed signs of stability. The most important development in Eurozone was the decision of the ECB to curtail its bond-buying program after September. The Euro Stoxx 50 ended the month at 3395.6, down 25 points (0.74%) over the month.

The Chinese markets over the month were troubled by the trade war concerns with the Shanghai Composite and the Hang Seng Index ending the month at 2847.42 (-7.69%) and 28955.1 (-5.22%) respectively. The Indian market remained under pressure from rising oil prices and the resulting fall in rupee against the USD, over the month the BSE Sensex ended at 35423.5, up 0.14% from last month.

Source: www.moneycontrol.com / JP Morgan Asset Management

WEEKLY EQUITY MARKET UPDATE – 08/07/2018
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March 2018

Monthly Market Summary

March 2018

Fears of Trade War drive stocks down as the key US share indexes came under pressure in early hours of trading on Friday as President Trump in his tweets indicated of his plan to impose tariffs on steel and aluminium. The news pulled down the global markets amid the possibilities of retaliation from China and major economies and the consequent slowdown in global trade. The Dow finished up 0.3% as most of the losses were recovered in the later hours of trading. Regardless of the late recovery, the indexes witnessed one of the worst weeks this year. The DJIA, S&P 500 and NASDAQ posted their weekly figures of -3%, -2% and -1.1% respectively. The threat of an international trade war also sparked concerns in the fixed income markets as the companies may look to pass on the rise in cost from tariffs to the consumers. It is causing an increase in the expected inflation, leading to a rise in the yield of the 10 – year Treasury Note to 2.855% on Friday from 2.802% on Thursday. The Japanese equity was worst affected by the trade concerns as the steel industry and automakers bearing the brunt of the trade restrictions. The Nikkei ended the week at 21,181.64, a loss of 3.25 percent against the week earlier. The large-cap TOPIX Index fell 2.96 percent for the week and declined 6.01 percent YTD. The FTSE 100 index ended at 7,069.90, the lowest close since Dec. 23, 2016, according to FactSet data. No sector gained ground, and the basic materials group fell the most. For the week, the London benchmark fell 2.4%, a second straight weekly decline. The political risk in conjunction with the weaker economic prospects arising from inflation and a lack of real wage growth and the issues related to BREXIT has resulted in mounting pessimism towards UK equities. Emerging markets are likely to pay a heavy price as the proposed trade restriction will result in higher commodity prices in the international markets and the consequent fall in the local currencies. Emerging markets have witnessed an outflow of $5.8 billion of funds from non-resident investors last month, a report from the Institute of International Finance shows.
WEEKLY EQUITY MARKET UPDATE – 04/03/2018
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