The Week That Was

Global equities moved higher on better-than-expected macro data and signs that the US and Iran were inching towards a deal. US equities edged up, with the S&P 500 rising 66bps, led by value-oriented sectors such as Financials and Materials.

European equities rallied by 1.7%, with Travel & Leisure names among the best performers as Brent crude fell by 6.2%. The softness in oil, combined with a continued sell-off in gold (-2.5%) despite confirmation that China increased its purchases of the precious metal by the greatest amount in 15 months, saw global commodities decline by 2.7% in euro terms. Meanwhile, global bond markets rose by 0.7% in euro terms, supported by easing US core inflation and less hawkish than expected commentary from the ECB.

Summary Economic Releases

The Week Ahead

Asian markets climbed higher this morning as the US and Iran agreed to extend their ceasefire and reopen the Strait of Hormuz. This also resulted in a sharp 4.7% fall in Brent crude futures to $83.3 a barrel, alongside a weakening of the dollar and a rebound in precious metals. The sustainability of these moves will be dependent on progress made in the 60-day negotiating window; however, both sides have a vested interest in a durable solution.

From a corporate perspective, earnings releases are light in what is a holiday-shortened week in the US. Nonetheless, results from Accenture will be in focus, where expected market share gains are unlikely to be enough to offset a hesitancy among corporates to commence large-scale transformation projects. Hewlett Packard Enterprise will grab market attention as it hosts an investor day centred on its medium-term financial outlook and how it intends to capitalise on the AI opportunity. Flutter, which climbed 10.3% last week, will be in focus over the next few weeks as investors assess sports betting trends from the FIFA World Cup, which is estimated to be worth between $5bn and $10bn of consumer sports betting volumes. From a European perspective, the formal agreement to reopen the Strait of Hormuz should act as a tailwind for the Airlines, Chemicals and Auto sectors within the equity space, whilst the resultant fall in inflation expectations is also likely to be supportive for short to medium-term European government bonds.

From an economic perspective, EU trade data released this morning will be closely analysed for evidence that China is shipping growing amounts of products to the bloc below their cost of production. Tuesday is likely to see the BOJ raise interest rates to 1.0%, representing its highest rate since 1995. On Wednesday, US retail sales are expected to hold steady in May despite elevated energy prices, thanks to a softening in goods price inflation. Kevin Warsh will also preside over his first FOMC meeting on Wednesday and, whilst no change to its interest rate policy is expected, the recent inflationary spike may see the committee step back from its ‘easing bias’. On Thursday, the likely success of Andy Burnham in the Makerfield by-election could put upward pressure on UK borrowing costs, as he has been critical of government austerity measures and is favourite to become the next leader of the Labour Party and thus Prime Minister.

Opportunities this week:

• Cairn Homes (Overweight, PT €2.83, 27% upside) – Irish housing market update
• Grafton Group (Overweight, PT £12.05, +42% upside) – Recap on Capital Markets Day
• Glanbia (Neutral, PT €22.90, 4.6% upside) – Moving stock to neutral after strong rally.

Written by John Mullane, CIO, Cantor Fitzgerald Ireland

This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more detail on individual securities, or to discuss how we can support your investment needs, please get in touch.