|Asset||Current Value||Weekly Change|
|WTI Crude Oil||52.23||2.78%|
The second quarter started with a hectic week for global financial markets, as the central banks remained in the center of attention before the US missile attack in Syria took over the headlines. Stocks remained stable with a slight rotation between the main indices, as the previously strong DAX and Eurostoxx 50 were among the weaker benchmarks during the period. The Fed’s and the ECB’s meeting minutes were the most anticipated announcements of the week (dwarfing even the expectations regarding the usually crucial US employment report), and the US Dollar came out as the strongest currency after the choppy period, as the Fed still seems to be the most committed to raising interest rate and tackling inflation.
Crude oil was among the winners of the period, despite the rally in the Dollar. Gold had a mixed week, as it finally topped $1260, but plunged back below the crucial resistance on Friday as stock markets recovered, possibly pointing to a more significant correction ahead. The Euro was very weak in the second half of the week, as the dovish comments from Mario Draghi cooled down expectations regarding an imminent monetary tightening in the Eurozone. The Pound also lost ground against its major peers although British equities were holding up well.
Gold Futures, 4-Hour Chart Analysis
Bitcoin and Litecoin dominated the cryptocurrency market, as the stellar weekend rise of Ripple was halted by a deep correction. Bitcoin rose back near the $1200 level just two weeks after testing the 880 level, while Litecoin hit $12.50 following a strong breakout from below the $4.50 zone. Ethereum traded sideways throughout the week above the $40 level, while Monero drifted lower after a failed rally attempt. Dash found support near the $60 level after rising 5-fold from $20 to $100 between the end of February and mid-March.
The UK provided a number of negative surprises on the economic front this week, as the manufacturing PMI, the construction PMI, manufacturing production, and industrial production all disappointed, with only the services segment showing strength. US and other European numbers were mixed, but remained mostly in line with the stable growth narrative. The ISM non-manufacturing PMI provided the biggest negative surprise, but it still shows robust growth in the sector. US initial jobless claims dipped lower after a worrying jump, although the employment report was mixed once again. Canada is still a bright spot globally, despite the weakness in the local real estate market.
Range contraction was the name of the game for the most watched stock index in the world, as last week’s bounce stalled out near the upper boundary of the dominant technical pattern (a so-called Megaphone). The benchmark got stuck in a narrow interval towards the end of the week, and this phenomenon often precedes a significant move, as the “tension” in the market grows. The MACD also shows how compressed the recent days were for US stocks, as the indicator didn’t leave the neutral zone, and failed to give a meaningful signal in any direction.
S&P 500, 4-hour Chart
The S&P 500 finished the week right in the middle of the crucial 2350-2355 support/resistance zone that played a key role in recent weeks. The recent all-time high near the 2400 level is the most important resistance ahead, while the 2332 support could also be in play next week, should the index leave the current holding pattern on the downside. The financial sector that we have been monitoring recently also traded in a narrow range throughout the week, so the first few sessions could be critical next week.
Key Economic Releases of the Week
|Monday||AUSTRALIA||Retail Sales (monthly)||-0.10%||0.30%||0.40%|
|Monday||US||ISM Manufacturing PMI||57.2||57||57.7|
|Tuesday||AUSTRALIA||RBA Rate Decision||1.50%||1.50%||1.50%|
|Tuesday||CANADA||Trade Balance||-1 billion||0.7 billion||0.8 billion|
|Tuesday||US||Trade Balance||-43.6 billion||-46.7 bill||-48.5 bill|
|Tuesday||US||Factory Orders (monthly)||1.00%||0.90%||1.2%|
|Wednesday||US||ADP Employment Change||263,000||184,000||298,000|
|Wednesday||US||ISM Non-Manufacturing PMI||55.2||57||57.6|
|Wednesday||US||Crude Oil Inventories||1.6 millon||-0.1 million||0.9 million|
|Wednesday||US||FOMC Meeting Minutes||–||–||–|
|Thursday||GERMANY||Factory Orders (monthly)||3.40%||3.50%||-0.80%|
|Thursday||EUROZONE||ECB Meeting Accounts||–||–||–|
|Thursday||CANADA||Building Permits (monthly)||-2.50%||–||5.40%|
|Thursday||US||Initial Jobless Claims (weekly)||234,000||251,000||258,000|
The Story of the Week: Quarterly Performance of Asset Classes
Performance of different asset classes in Q1, Source: Deutsche Bank
If you follow financial markets on a daily basis, it is sometimes inevitable that you lose track of the big picture. As the first quarter of 2017 ended last week, we take a look at the performance of the major global asset classes with the help of Deutsche Bank’s cheat sheet. Generally speaking, the quarter was quiet, as volatility remained tame, especially in the US where the Volatility Index (VIX) hit record lows, as the S&P 500 didn’t fall by 1% for more than a 100 trading days in a row.
Interestingly commodities are found on both ends of the performance chart, as Crude Oil was the worst performing asset thanks to the technical breakdown of the last week of March, while precious metals sit at the top of the list after a healthy rally. Emerging markets were also among the best places for investors in the quarter with the Brazilian Bovespa Index yielding more than 10%. The Hang Seng (Hong Kong) and the DAX were the strongest major indices, but the FTSE and the main US benchmarks also performed well. Russian equities lagged their global counterparts as the weakness in oil coupled with the increasing political tensions weighed on the country’s assets.
Looking at currencies, the Dollar’s correction was the main theme of the quarter, as the greenback retreated a bit, off its multi-decade highs against the Pound and the Euro after the post-election euphoria faded away. Donald Trump’s first months in office were less significant to financial markets than most analysts expected, although the media-hype was constant. US indices hit all-time highs throughout the period as the global bull market turned 8 on the 6th of March.