Last week markets appeared to be fully discounting positive outcomes on Trade and Brexit. The fear was that if no trade deal or hard Brexit happened, markets would sell-off and this is exactly what happened in the wake of Donald Trump’s tweets on last Sunday.
Whilst global equity markets are flat on the week, they are up year-to-date 12-13%. However, the big news over the last ten days was that bond markets suddenly became tired of waiting for the anticipated upturn in global industrial production, which equity markets are pricing in.
Global equity markets are up roughly one per cent this week. Volatility is still low and ten year US government bonds have rallied a little on the week and now stand at some 2.5% versus 2.6% last week. Year to date global equity markets are up some 12-13%.
Those who follow this commentary know the authors believe that the three main market driving topics are trade, Chinese stimulus and Brexit. However, one additional topic is knocking on the door for inclusion: