Investment Markets Weekly
18 February 2019
Last Week
  • Markets: Another solid week for equities which rose by 2.6% in euro terms. They were spurred on by a combination of continued solid Q4 2018 earnings and rumours surrounding the US China trade talks. Global bonds (currency hedged) were marginally down over the period.
  • Q4 2018 Earnings: Further positive results last week – by the end of the week 396 of the S&P 500 had reported. On average US companies beat earnings forecasts by 3.2% while overall earnings were currently up 11% compared to Q4 2017.
  • Trade: Investor sentiment was helped by rumours that President Trump was willing to extend the March 1 deadline after which tariff rates on $200 Billion worth of Chinese imports are due to increase. Both sides met last Thursday in an effort to reach a preliminary deal to end the trade difficulties.
  • Euro Area Economy: Last week’s economic data continued to highlight how much the European economy is struggling. Eurozone industrial production declined by 4.2% in annual terms in December, the worst performance since December 2009. In addition, GDP growth came in at just 0.2% for the quarter – the same as in Q3. Not surprisingly the German economy captured a lot of headlines related to this as it flat lined in Q4 – just barely avoiding going into recession.
  • UK/Japan Economy: UK Q4 GDP growth fell to 0.2% from 0.6% in Q3. However, we saw a much improved performance from the Japanese economy which rebounded from the surprise contraction in Q3.
  • Inflation: We also saw January inflation updates in the US and UK. Generally the patterns were similar – falling oil prices fed into weaker annual headline inflation rates although core inflation rates (excluding energy) were stable.
Chart of the Week
graph of the week 260218 PNG.png
The chart of the week shows that bond yields in the Eurozone (as represented by 10 year German bund yields) have consistently declined in recent months in response to the weakening economy. As yields have declined so too have investors’ expectations that the European Central Bank will increase interest rates this year. We can see that the fading hope of rate hikes in the Eurozone, has weighed on the banking sector which has underperformed the broader equity market so far in 2019.
This Week
  • Central Banks: This week the minutes from the US Federal Reserve’s January meeting will be published (Wednesday). They will be closely watched for any further signals about future interest rate moves following Chair Powell’s dovish press conference in January.
  • Economic Data: Preliminary February Purchasing Managers' Index estimates in the US and Eurozone are due out on Thursday. These will be of real interest given the readings have weakened in the past six months.
  • Q4 2018 Earnings: Investors will also be keen to see the Q4 2018 earnings season finish on a satisfactory note.
Links to Fund Centres:
Bank of Ireland Private
New Ireland Assurance
Life Online
This document has been prepared by Bank of Ireland Investment Markets (“BOIIM”), is for informational purposes only. Any information contained herein is believed by BOIIM to be materially accurate and true but BOIIM expresses no representation or warranty as to such accuracy or as to such information’s completeness and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of such information and such information should not be relied upon for any purpose. Registered Office: Head Office, 40 Mespil Road, Dublin 4, Ireland. Registered Number: C-1.
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