Mazars Weekly Market Update: Apple sours market recovery

Read our full Market Update Week 16

Market Update

Equity markets saw another week of recovery with positive returns across all regions. Returns for UK investors were boosted by a weak return from Sterling, which sold off 1.75% on a trade weighted basis as Mark Carney, the Governor of the Bank of England, made comments which suggested that the MPC might delay a rate hike until later in the year. In Sterling terms Japanese equities led the way, up 3.0%, while European equities also gained 2.7%. UK equities gained 1.6% and Emerging Market equities 0.6%. US equities performed well until Friday, when a note by Morgan Stanley which forecast that iPhone sales for Q3 will disappoint saw shares in Apple, the largest company in the world, sell off 4.1%, pulling other tech companies lower also. As a result US equities were up 1.6% for the week. Meanwhile US 10Y Treasury yields have moved higher, closing the week at 2.96% and hitting 2.99% as of this morning. The figure is now at the highest level since the ‘Taper Tantrum’ in 2013, and has dragged other global yields higher, with the UK 10Y Gilt yields now at 1.52%.

CIO Analysis

Markets continued to wobble last week, as traders, now less certain that central banks will actively repress volatility, don’t see price falls as absolute buys. In other words, “buying the dip” does not guarantee success. Continued volatility overshadowed very good news for markets last week. The appointment of a capable and more importantly moderate-to-dovish Fed Vice chair, and a very good earnings season, with 80% of US companies beating estimates, on their way to another very good quarter. Less central bank hawkishness and better earnings should improve the fundamental backdrop for risk assets over the longer term. Short term behaviours can be altered by the manifestation of longer term trends. So even if traders, many of whom have not seen a rate hike before this cycle, are worried about central banks, the improvement of fundamentals certainly helps longer term investing.

David Baker, CIO