Monthly Global Market Commentary April 16, 2018
By Peter Goodall | April 17, 2018
Markets ended a strong week on a high note as trade war concerns eased and earnings season started off with positive news out of the banking sector. The S&P500 ended the week up 2.04%, and the MSCI World Index was up 1.81%.
Corporate Earnings Season
Corporate earnings season got off to a good start as strong earnings reported out of the financial sector. The banking sector has been benefitting from the rising interest rate environment and the tax cuts. Despite the positive news (in some cases topping both revenue and net earnings consensus), the financial companies that were reporting still underperformed the broader market.
On April 6th, the US Treasury department issued a press release outlining sanctions freezing the assets of an expanded list of Russians with ties to Putin. Additionally, non-U.S. persons could face sanctions for knowingly facilitating significant transactions for or on behalf of the individuals or entities which were blocked.
One of the affected companies is United Company RUSAL, a large aluminum producer. On the news, the company price fell 11.3% on the London exchange. This has caused the price of aluminum to spike as the global supply chain readjusts to a higher price point.
Trade War Concerns Abated
Trade war concerns abated this week as news dropped out of the collective consciousness. The US and China are in talks. Monday, while at the BOAO Economic Forum, China’s President Xi promised to open the country’s economy further and lower import tariffs on automobiles. While these are not new promises, their affirmation led markets to rally on optimism that the trade war may be resolve on more amicable terms.
While the markets may be content with the current tone, we continue to be conscientious of the risks. In accordance with WTO rules, the US and China are in the 2-month window where they can attempt to resolve their trade disputes. After that, the issue would be escalated to the WTO panel for review and dispute resolution. President Trump has repeatedly spoken out against the WTO (an institution founded by the US). If the ruling were not to go in the United States’ favor, we could see additional market volatility.
While uncertainty in the Russian markets is relatively isolated, we are monitoring its effects on the commodities markets. We expect the markets to continue to be volatile in the coming months as the trade disputes narrative continues to play out.