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Weekly market review

Week ending 20 May 2016


Stocks

The US stock market ended the week up just 0.35%, bouncing back on Friday from investors’ negative reaction to Federal Reserve (Fed) commentary. European equity markets did better and managed to shrug off the Fed jitters, with the Eurostoxx 600 closing up 1.15% and the UK stock market making a slight gain to close at 6156.32. Japan’s Topix also gained (up 1.76%) in a week highlighted by a positive surprise in GDP growth and speculation over the possibility of an aggressive US Fed serving to weaken the yen.

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Fixed Income

The US 10-Year Treasury sold off sharply, with its yield rising to 1.85%, reflecting the more assertive tone in the release of the Federal Open Market Committee’s (FOMC – a branch of the Federal Reserve board that determines the direction of monetary policy) April meeting minutes. Most European yields rose in sympathy following the release, with the German Bund rising to 0.165% and the UK government bond yield closing higher at 1.452.

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Currencies

The focus of the week was the US dollar, which gained as markets sought to re-price expectations for Fed action on the central bank’s hawkish comments. The British pound was the exception among major currencies, its 1% rally against the dollar coming as polls showed Brexit fears receding. The yen broke above ¥110 as the impact of the Fed’s meeting minutes more than offset Japan’s stronger GDP figures. In China, the yuan hit its weakest level since February, adding pressure for government intervention.



Commodities

West Texas Intermediate Crude oil continued its upward trend despite pressure from US dollar strength. Volatility in oil prices could be attributed investors re-evaluating their hedged positions due to expiration of contracts based on future prices of the commodity in the past week.

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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.


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