Financial Markets Update

February 6, 2018

  • It’s official; market turbulence seems to have finally arrived. On Tuesday, the S&P 500 lost as much as 2.1% in the first minutes of trading – only then to erase all of its losses and rise by 1.3%. The index ended the day under 1% as investors reckoned with the end of the European trading day. This comes after the US market suffered its biggest percentage fall since 2011. Ironically, many see this as a reaction to global economic health; with rising wages and inflation across the developed world putting upward pressure on interest rates (which in turn reduces the attractiveness of shares).

  • US government bonds have not been spared from the volatility – reaching a four-year peak of 2.89%, only to fall to 2.69% in a global dash to safe-haven assets. Strong wage growth in America is likely to elevate the case for continued monetary tightening, which will only put further upward pressure on bond yields.

  • On Monday, Bitcoin fell by as much as 8.1% to $7524 – its lowest level since November 2017. The prospects of the currency have been dented by the increasing appetite for regulation by sovereign governments – particularly those in East Asia.

  • Global economic growth failed to save oil prices from a sharp decline – with Brent crude futures down 1.1% to $66.91. Volatile global markets, along with significant supply from US shale, promises significant uncertainty in the oil markets over the next several weeks.

  • The pound remains at a relatively strong $1.40 despite continued infighting within the Conservative Party over Brexit negotiations. The currency’s strength is partially down to the dollar’s weakness as well as the Bank of England’s potential appetite for rate rises in the months to come.  

     

     

     

     

     

     

     

     

     

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