The Week in Review: 8th-12th April
Trading Performance
My approach to trading this week remained largely unchanged. I continued to focus on two UK rate driven equities, as I await more favourable entry conditions for several US equity and FX market setups. As shown below, trade performance between Monday and Thursday was weak, as markets priced in the implications of a major central banks rate decision, alongside hotter than expected US inflation data. However, upon deeper analysis of the situation, trade fundamentals were reviewed and remained sound. This presented a unique opportunity, allowing me to capitalise on lower asset pricing through Thursday to increase long exposure, taking the total number of open positions to six.
On Friday morning, UK equity markets rallied after a positive GDP print, pushing the FTSE 100 briefly above the 8,000 level. I was relatively happy with the profit on positions, therefore expecting a slight price reversal I closed all positions. As of Friday 12th April the total PnL of the account sits at 2.06% for the last two-week period.
USA
For the second consecutive week, equities traded downwards, with all three major indexes closing Friday’s session lower than their Monday opening prices. The Dow ($INDU) led declines falling 2.4%, followed by the S&P 500 ($SPX) which fell 1.69%, and the Nasdaq 100 ($NDX) which fell 0.7%. Macroeconomic data prints were the main factor in driving market movements, with key inflation indicators CPI and PPI releasing for March.
Wednesday marked the release of US CPI data for March which indicated that inflation remains a challenge for both US consumers and the Fed. On a month-on-month basis CPI had risen 0.4% through March, 0.1 percentage points ahead of analyst expectations. Year-over-year inflation also came in higher than anticipated at 3.5%, exceeding expectations of 3.4%. Rising energy prices continue to counteract the Feds current monetary policy approach.
Thursday’s PPI data managed to provide a small break for equity markets, figures fell at 0.2%, 0.1 percentage points below analyst expectations. This print indicates that price increases on a producer level are occurring at a slower than anticipated pace, which as a leading indicator should benefit consumers and the wider inflationary outlook.
Europe
European market activity didn’t mirror US sentiment, with traders benefitting from ECB optimism and Friday’s UK GDP print. The FTSE 100 (FTSE) rose 84.42 points (1.07%) to 7,995.58. The index managed to break 8,000 level twice throughout the week, though traders have failed to establish support above the level.
The ECB announced the outcome of their April meet on Thursday, holding Eurozone interest rates at 4.5% through April. Officials indicated a willingness to cut rates in the near future, if inflation data continues to converge toward their long-term 2% target. Friday’s UK GDP print supported market sentiment. Data showed that the UK economy expanded by 0.1% during February, in line with analyst expectations. Despite being comparatively low, marginal growth holds the UK out of recession, increasing the likelihood that the BOE is able to achieve a soft landing.
Asia
The Nikkei 225 sent mixed signals throughout the week, as the index continues to trade below the 40,000 level. Prices rose 116.35 points (0.3%) through the week to 39,523.55, as equity gains benefit from a depreciation of the Yen. The Japanese currencies struggles have continued, as the psychologically significant 152 level was broken upon the release of Thursday’s US CPI data. As of Friday, at 18:18 GMT, the Yen was trading against the US Dollar at 153.1250.
The Shanghai Stock Exchange Composite Index (¥SSE) traded against macroeconomic headwinds, falling 37.85 points (1.24%) to 3,019.47. China’s March CPI was reported at 0.1%, 0.3 percentage points below analyst expectations. This is problematic as it raises the potential issue of deflation within the economy, as a level of inflation is deemed healthy within an economy.
What to Watch Next Week:
Monday 15th April
US Retail Sales M/M
US Earnings:
Goldman Sachs ($GS)
Charles Schwab ($SCHW)Tuesday 16th April
Chinese Industrial Production Y/Y
BOE Governor Bailey (IMF Address)
Fed Chair Powell Address
US Earnings:
Johnson & Johnson ($JAJ)
Bank of America Corporation ($BAC)
Morgan Stanley ($MS)
BNY Mellon ($BK)Wednesday 17th April
UK CPI Y/Y
US Weekly Crude Oil Inventories
BOE Governor Bailey (IMF Address)
US Earnings:
ASML ($ASML)
Prologis ($PLD)
US Bancorp ($USB)Thursday 18th April
US Earnings:
Taiwan Semiconductor Manufacturing Company ($TSM)
Netflix ($NFLX)
Blackstone Inc ($BX)Friday 19th April
UK Retail Sales
US Earnings:
Procter & Gamble ($PG)
American Express ($AXP)
Sources:
https://uk.finance.yahoo.com/world-indices/
https://uk.finance.yahoo.com/commodities
https://www.londonstockexchange.com/indices/ftse-100
https://www.binance.com/en-GB/price/bitcoin
https://www.binance.com/en-GB/price/ethereum
https://qontigo.com/index/sxxp/
Stock Market Activity Today & Latest Stock Market Trends | Nasdaq
https://coinmarketcap.com/charts/#market-cap
https://www.forexfactory.com
Definitions:
YoY - Year on Year, or, Year over Year
MoM - Month on Month, or, Month over Month
QoQ - Quarter on Quarter, or, Quarter over Quarter
ECB - European Central Bank
BOJ - Bank of Japan
Fed - Federal Reserve
BOE - Bank of England
SNB - Swiss National Bank
DOJ - Department of Justice
PnL - Profit and Loss