LAST WEEK – KEY TAkeAWAYs
Shares trade lower as China/US trade war escalates…
US shares fell on Monday (2 April) after China introduced duties of up to 25% on 128 American products, including pork and apples. The move from Beijing came in response to US import tariffs on steel and aluminium, which were introduced last month. China will respond to any new US tariffs on Chinese products with countermeasures of the “same proportion” and intensity, Beijing’s ambassador to the US Cui Tiankai said.
…while FAANG stocks under pressure after Trump tweet
The so-called FAANG grouping of US tech stocks – Facebook, Apple, Amazon, Netflix and Alphabet (Google) – came under more pressure amid signs of greater scrutiny and regulation. Amazon in particular has been hit following a series of harsh tweets from Donald Trump accusing it of skirting state sales taxes and of scamming the US Postal Service.
Mixed signs from final UK and US GDP figures
The UK remained as the world’s slowest-growing major economic at the end of last year, with gross domestic product (GDP) for the fourth quarter of 2017 unrevised at 0.4%. This meant GDP registered at 1.8% between 2016 and 2017, less than the 1.9% seen between 2015 and 2016, according to data from the Office for National Statistics. In contrast, US fourth-quarter GDP growth came in at 2.9%, up from the previously reported 2.5%.
UK house price growth stalls
UK house prices fell in March, for the second month in a row, according to mortgage lender Nationwide. The average price of a home was £211,625 last month, down 0.2% from February, a month in which values fell by 0.4%. London was again the worst-hit region, with prices down 1% from a year earlier. In contrast prices in Northern Ireland were up 7.9% on an annual basis. Nationwide predicted that an ongoing squeeze on household budgets is likely to continue to exert a modest drag on the housing market this year.
Confidence crisis for eurozone?
Eurozone economic confidence fell for the third month in a row, according to Eurostat. The sentiment indicator fell by 1.6 points to 112.6 in March, as a result of drops in industry, services and retail trade. Another measure, the eurozone manufacturing purchasing managers index, came in at 56.6 in March, in line with expectations.
Looking ahead - TALKING POINTS
Encouraging picture for US jobs market
The US Labor Department will release its jobs data for March, with analysts looking for another drop in unemployment. Non-farm payrolls data – a measure of the labour market complied from data by goods, construction and manufacturing companies – is expected to rise, building on encouraging data in February when 313,000 jobs were created.
Currently, unemployment stands at 4.1%, and there are expectations that this could fall to a near two-decade low of 4%, given the recent small number of layoffs and gains in labour force participation. The consensus view is also for average hourly earnings to exhibit a year-on-year gain following February’s 2.6% rise.
US unemployment rate (%) – March 2017 to February 2018
Source: US Bureau of Labor Statistics, tradingeconomics.com
Inflation and unemployment data due from Europe
All eyes will be on the euro this week, with the currency likely to be impacted by any surprises from eurozone inflation numbers, and that latest update on unemployment. Economists are forecasting that figures released by the European Union’s statistics agency will record a pickup to 1.4% in March. Inflation has remained low across the continent, though could now begin to pick up given the impact of year-on-year changes in energy prices. However, the European Central Bank unlikely to raise interest rates while the data falls below its target at close to 2%.
Latest data for February is expected to show a decline in unemployment, which stood at 8.6% in December and January. The trend has been for jobs creation with the figure as high as 9.5% a year ago.
Eurozone inflation (%) – March 2017 to February 2018
Source: Eurostat, tradingeconomics.com
THE OMNIS VIEW
Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles. Volatility in global equity markets is inevitable, while it is also understandable that investors keep a close eye on the performance of the giant tech stocks, of FAANGs, which now make a up a huge proportion of the US stock market. However, it is worth noting that Omnis managers remain on the whole wary of investing too much in these, and their Asian equivalents, given concerns about overvaluation of some of the stocks.
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