Weekly market review
Week ending 11 November 2016
The UK stock market had a mixed week. Trump’s presidential election win initially sent markets falling, before his victory speech helped steady markets slightly. However,the downward path continued on Friday due to returning volatility and the increase in the strength of the pound against the US dollar. The election outcome did spark an unexpected rally in the US, driving their stock market to a 3.9% gain for the week. Emerging markets ended down 3.5% amid fears that global trade agreements will come into question under the new administration, although China’s Shanghai index was a resilient exception, rising 2.3%.
With increased expectation that Trump’s policies could support growth and inflation, US 10-Year Treasury bond yields jumped on Wednesday making their largest single-day surge in more than three years. The bond sell-off in the US had ripple effects and 10-Year bonds globally also rose to multi-month highs.
The pound rose last week, against both the US dollar and the euro, with Brexit-based anxiety easing as a result of realisation that Article 50 is now in the hands of Brexit-sceptic MPs and increased hopes of a US-UK trade deal, even though markets remain somewhat uncertain in the wake of the US election result. With Trump’s fiscal stimulus plans potentially pushing the Federal Reserve (Fed) to raise rates more quickly than previously anticipated, the US dollar Index ended the week with a 2.3% gain. Trump’s victory simultaneously sent the Mexican Peso plunging 10.4% for the week as Mexico would likely be included in potentially-renegotiated global trade agreements. The euro was badly affected by increased worries over the upcoming all-important Italian referendum.
After the Organisation of Petroleum Exporting Countries (OPEC – the intergovernmental organization of oil-exporting developing nations that coordinates and unifies the petroleum policies of its member countries) reported record oil production in October, West Texas Intermediate Crude oil tumbled to $43.41/barrel. This move wiped out the price gains seen since OPEC’s September meeting, whose goals included reaching a potential oil production cut.
Where to next?
Source: Goldman Sachs Asset Management. Adapted by FundCalibre. This material is for information purposes only and does not in any way constitute financial advice.