Take Five – World markets themes for the week ahead


LONDON (Reuters) – Following are five big themes likely to dominate thinking of investors and traders in the coming week.

1/HAVE THIS YUAN ON XI

U.S.-China trade frictions will remain a central focus next week. There are hopes there will be negotiations that end with everyone looking happy for the cameras, but for the time being everything remains uncertain.

One background issue over the last couple of weeks has been a sizable appreciation of the yuan. In trade-weighted terms .CFSCNYI, the currency has now risen more this year, at 3 percent, than it did in the whole of 2017.

It has been closely hugging the daily benchmark fixing set by the central bank, so markets are speculating that allowing the yuan to rise might be part of China’s conciliatory offerings in the trade spat.

Reuters Graphic

2/LOOK AT ME GROW

Spring is coming to large parts of the northern hemisphere so it seems fitting that so much global data is coming out next week.

World stock markets have just seen their first quarterly fall in two years and this will feed the view on how Q2 might play out.

March inflation data from the euro zone on Wednesday is expected to creep up and bolster bets on the end of ECB QE this year.

Similar data in Turkey will be watched by those trading the battered lira, while there is forward-looking purchasing manager (PMI) data, ISM or employment numbers in so many countries from the United States to India that most economists will just need a lie down come Friday.

ECONALLUSECONALLEZ

Global trade and GDP growth

Reuters Graphic

3/TECH REBOOT

Whether or not the world’s biggest tech and social media firms can bounce back from the more than $400 billion wipe out of the last couple of weeks is going to be one of the big things to watch next week.

Facebook’s top brass might reveal when they will appear in front of lawmakers in the United States and Britain to answer questions about the misuse of 50 million users private data.

The heat is also likely to stay on online retail giant Amazon after reports Donald Trump is not happy that its growing dominance is sending so many small businesses to the wall.

Reuters Graphic

4/ BREXIT, PURSUED BY A BEAR… AND A BULL

There is now less than a year to go until Britain formally exits the European Union, but sterling and UK stocks are giving off some conflicting signals as the final countdown gets into gear.

The pound, seen as the main Brexit bellwether since the June 2016 vote, has just had its best quarter in three years, and not only against the struggling dollar, but also against the euro GDP=D4. On a trade-weighted basis too it is inching back toward its ten-year average, which all suggests improved investor confidence after this month’s post-EU transition deal helped soothe lingering ‘hard’ Brexit nerves.

But sentiment on UK stocks has never been this bad: a record number of global fund managers are underweight the asset class and the FTSE 100 has just had its worst quarter in 6-1/2 years.

So what gives? Well, there’s the global sell-off of course, but its also partly the flip side of sterling’s success. Its weakness provided a big boost to FTSE 100 companies with earnings in dollars due to the currency conversion gains, but now that crutch for large-caps is gone and with it a major reason for holding them.