News of positive earnings reports from JPM and Wells Fargo, plus stronger-than-expected data out of China helped lift investor sentiment on Friday, ensuring that Wall Street enjoyed a solid end to the week. The S&P500 closed with a 0.7% gain, above 2900 for the first time since October and less than 1% below the all-time high. The 10-year US Treasury yield climbed 7bps to 2.57% – now 20bps above last month’s low. In currency markets, as usual, the more positive tone resulted in stronger commodity dollars with AUD leading the way, with less demand for JPY and CHF.
Last week was obviously another tumultuous one for the Brexit process with much midnight oil being burnt in Brussels. IMF’s Christine Lagarde successfully summed things up after the UK was granted a compromise six month extension when she said this delay avoids the ‘terrible outcome’ of a no-deal solution, but does not lift the uncertainty over the final outcome. There are still so many possible conclusions - we may see a general election, another referendum (though time is tight) or even more indicative votes. The betting markets have a PM departure around July ahead of the Conservative Party conference and yet if the landscape doesn’t actually change that much, stockpiling and no-deal risks will ratchet up once more into the new exit date.
More importantly, financial markets didn’t blink at all with cable printing the narrowest range week this year, up a measly 0.25%. The hope is that traders can move on as markets are likely to focus on things other than Brexit now.
In which light, UK data this week may take on enhanced significance given the lowered risks of a hard Brexit, pushed out timelines and Parliament's Easter recess.
Below is a preview of what to look out for across global markets this week:
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