Quilter Cheviot|Weekly Comment

A week of calm before Earnings reports and elections

Our weekly market overview from Quilter Cheviot

By Richard Carter, Head of Fixed Interest Research

Global stock markets stood steady in the recent trading week, reflecting a period of relative calm as investors awaited the upcoming earnings reports and UK General Election. The MSCI All Country World Index (MSCI ACWI) saw a slight increase of 0.1%, marking a 2.3% rise in June and an 11.6% gain year-to-date (YTD).

It was a light news week in the US, leading to a lull in market activity. Large cap dipped slightly by 0.1%, despite a 3.6% increase in June and a 15.3% YTD growth. Small-cap companies and tech stocks were the standout performers, with the former edging up by 0.2% and the latter by 0.3%. Tech stocks have been particularly impressive over the past month, boasting a 6.0% growth and an 18.5% rise YTD.

European markets were mixed, with the MSCI Europe ex UK Index losing 0.6%, influenced by political uncertainties in France ahead of President Emmanuel Macron’s snap election. Germany’s large caps managed to gain 0.4%, while France and Italy’s large caps saw declines. The euro remained relatively stable against the US dollar, ending the week as USD 1.07 for EUR.

Japan’s stock markets emerged as the week’s highlight, with the large cap surging by 3.2% and the small cap rallying by 2.4%. The yen’s historic weakness, which saw it plummet to its lowest levels in 38 years, provided a significant boost to the nation’s export-centric industries.

The UK’s quiet week gearing up for change

As the UK steadies itself for a pivotal week, many financial markets have entered a phase of caution as we look towards the upcoming General Election. Large caps have seen a modest decline of 0.8%, mirroring a 1.0% drop in June and a 7.9% YTD increase. Mid cap followed suit, slipping by 0.7%. Amidst these shifts, the British pound has remained stable against the US dollar, ending the week at USD 1.26 for GBP.

Despite the escalating political tension, the financial markets have displayed a surprising level of composure. Over the last month, critical economic indicators, including sterling, the 10-year gilt, and large cap markets, have shown only slight fluctuations.

This week is crucial for the UK as the electorate heads to the polls on Thursday to decide on their next government. It will also be marked by the release of key economic data, including the final June purchasing managers’ surveys for manufacturing and services, which will offer further insights into the economic climate.

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