Weekly market review
Week ending 15 July 2016
Despite a backdrop of global political uncertainty, solid earnings releases helped the US stock market reach a new high of 2169.05. Similarly, the Eurostoxx 600 index rose 3.3% following the Bank of England’s (BOE) surprise decision to keep its interest rate steady, although a deadly terror attack in Nice trimmed the gain. Along with the BOE interest rate decision, Prime Minister Theresa May’s major cabinet reshuffle and continued Brexit-fuelled uncertainty ensured a volatile week for the UK stock market, which closed slightly up at 6657.58. In Japan, Prime Minister Abe’s supermajority win helped the Japanese TOPIX index jump 8.9%. Despite the volatility spike across equities in response to the UK referendum several weeks ago, today, global stocks are already near their pre-Brexit levels.
The improving economic outlook pushed Treasury prices lower this week. Strong US economic data led to US 10-Year Treasury bond yields experience their biggest two-day increase since December 2015, rising to 1.59%. UK government bond prices reacted similarly following the BOE’s decision to hold rates steady, with the 10-Year government bond yield rising to 0.83%.
The Japanese yen weakened 4.8%, its biggest weekly decline in more than 15 years, following the Japanese Prime Minister’s appeal to speed up efforts to defeat deflation. The Pound strengthened 2.0%, with an element of political stability returning to the country, following the announcement of Theresa May as Prime Minister. The Bank of England’s interest rate decision also helped extend the Pound’s rally from a recent 31-year low against the US Dollar.
The oil market continues to rebalance towards equilibrium as demand remains robust. West Texas Intermediate crude oil prices rose 1.2% on falling oil inventories, and broad risk market rallies coincided with gold slipping 2.1%.
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Source: Goldman Sachs Asset Management. Adapted by FundCalibre. This material is for information purposes only and does not in any way constitute financial advice.