Having advanced strongly for the year to date, with Global Equities returning +12.6%, markets took a breather last week and retreated by -1.1% in GBP terms. This was led by Europe Ex-UK and US Equities, while UK Equities and Emerging Market Equities fared better. Global Fixed Income indices were broadly flat, while the Pound Sterling rose against all major global currencies – which will have contributed negatively to the Equity returns mentioned above in GBP terms.
Economic news flow was broadly positive last week, with inflation picking up in the Eurozone unexpectedly as consumer prices rose +1.7%, up from +1.4% the previous month. This will provide some comfort to the ECB that there are some signs of economic life in the single currency area, although the rise in prices was largely driven by increased energy costs and calendar-sensitive components.
Across the Atlantic, additional positive news came in the form of the US non-farm payrolls employment data, which showed that the economy created 263,000 jobs in April, which exceeded forecasts of 190,000. The unemployment rate fell from 3.8 per cent to 3.6 per cent — the lowest since December 1969. On Wednesday the Chairman of the Federal Reserve, Jay Powell, maintained his position that there was no immediate need to move interest rates either up or down, despite repeated calls for president Trump to loosen monetary policy.
While the UK had a bank holiday on Monday, and celebrated the arrival of a new Royal Baby, President Trump decided to throw a tantrum of his own. He took to Twitter to decry the size of the US current account deficit with China. This was followed by an announcement from the Trump administration that the US was prepared to move ahead with tariffs on $200bn of Chinese imports in response to the impasse in the trade talks.