Macro View - London Academy of Trading

Written by Gavin Pannu, MSTA, CFTe

Economics

The value of British exports have expanded at the fastest pace since 2011 during the course of this year, UK goods and services exports will increase further by 10% in 2018 to reach £639bn. British exporters have been boosted by a weaker pound at the same time the economies of key trading partners have accelerated.

Construction and manufacturing across the UK have continued to fall, according to analysis from the Office for National Statistics. UK home buyer demand has fallen for its 12th consecutive month in March. Ian McCafferty, one of two MPC members to vote for a rate rise last month stated that the UK shouldn’t delay when it comes to tightening policy.

Federal Reserve’s meeting minutes, the first for new chair Jerome Powell were released this week. All of the policymakers felt that GDP would continue to increase and that inflation would rise in the coming months. A key area which will be monitored is wage growth, but overall a hawkish tone.

Geopolitics

Russian shares and the Russian ruble have taken a significant loss this week, investors reacted to US sanctions targeting some of Russia’s most prominent tycoons. Relationship between Russia and the west continues to deteriorate. Trump is expected to announce intervention to the Syrian regime, which is backed by President Putin who has been accused of carrying out a chemical attack in Douma.

US President Trump stated they will be ready for a potential missile strike on Syria. France and the UK appeared willing to support the US led strike. UK PM Theresa May has won support from her cabinet ministers to back the plan on British military action against Syria’s chemical weapons infrastructure. Russia retaliated by vowing to shoot down any missiles fired towards Syria.

Cryptocurrency

After a period of weakness, cryptocurrencies jumped sharply towards the end of this week. A $1000 move made within an hour. Recent news of George Soros and Rockefeller’s Venrock fund now looking to actively invest in digital currencies may have led to the bullish momentum.

Technology

Facebook CEO Mark Zuckerberg testified in Congress over data breaches, it was well received and investors boosted shares in the social network. President Trump ordered a review of the US Postal Service via an executive order, which has been linked to Amazons operating process which has cost the US Postal Services a significant loss in earnings.

Energy

OPEC members have accomplished its mission to reduce the global glut of crude. The International Energy Agency said less than 10% of the surplus in oil inventories remained as OPEC cuts were larger than expected and demand has increased. The oil price surged this week to a three year high as worries that tensions in the Middle East will lead to supply disruptions.

Equities

Tesco posted better than expected full year results ahead of expectations. But most retail businesses are continuing to suffer as weather conditions deter shoppers. WH Smith has trimmed dividends by 10% as profits came out flat. Carpetright shares slumped after management revealed it was closing 92 stores and cutting 300 jobs as part of a restructuring plan. Toys R Us announced it would close its final remaining stores by the end of April.

Overall equities have climbed higher as strong earnings season led to a bullish sentiment. The expectation of earnings season was to be a strong one, driven by solid global economic growth, robust manufacturing activity, weakness in currencies and benefits from tax laws.

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