Weekly Market Update: Markets rally, Tesla delisting cancelled

Read our full Market Update Week 34

Market Update

Last week and Monday was a positive period for risk assets, with global stocks returning +0.7%. EM equities gained the most, up +3.2% in Sterling terms and 4.6% in local terms, buoyed by Donald Trump’s announcement that he is prepared to resume talks with China (although he has since rowed back on this issue). In Sterling terms European stocks were up 3.1%, US equities gained 0.4%, UK equities 0.3%, while Japan was flat. UK 10Y Gilt yields rose 4.2bps, German 10Y Bund yields 7.1bps, while US 10Y Treasury yields fell -1.5bps. The Pound was mixed over the period, up 1.1% vs the US Dollar and 1.7% vs Yen, however down -1.0% vs the Euro. In US Dollar terms Gold gained 2.2%, Oil gained 4.5% and Metals gained 3.2%. The commodity price rises meant that the Energy and Materials sectors were the strongest performing over the period, with Utilities and Consumer Staples down.

CIO Analysis

Last Friday Elon Musk contradicted himself, announcing that he would not take Tesla private. After his fist tweet, claiming he had secured funding to take it private at $420, the price should have moved from $300 to close to $420. But markets were unconvinced, and the stock rose no higher than $380. With the plan scrapped, stocks didn’t plunge since investors had never really bought into Mr. Musk’s claims. It may have been only a matter of time before “post-truth”, which has made its way into politics, permeated financial markets. Saudi Arabia has all but cancelled plans to proceed with an IPO of Saudi Aramco. Mr. Trump said he was re-initiating negotiations with the Chinese, only to take it back after successfully negotiating changes in NAFTA in just one of his numerous about-turns in policy. The British Government has often changed course in search of a better Brexit deal. And so the story goes. Is greater uncertainty bad for markets? Not necessarily – with the possible exception of central banks – as it creates opportunities. But it may award higher valuation premiums to those individuals, countries or organisations who can honestly commit to a course of action.

David Baker, CIO