Last week …
Was a case of the calm before the storm. The week started slowly with subdued volumes before markets came to life on Friday with raised hopes of a Middle East peace deal.
Milan had a busy start to the week with takeover talk between Banca Monte Dei Paschi and Intesa San Paolo stimulating the market. Both stocks were among the top ten traded on Equiduct on Monday and both were also in the top twenty still on Tuesday.
We had a European Central bank rate hike on Thursday which was the first increase since September 2023.
Friday saw the IPO of Spacex which had been preceded by a tech sector sell off as investors looked to free up funds to participate.
Raised hopes of peace in the Middle East was the main catalyst on Friday as oil prices fell and banking and travel and leisure industry stocks surged. Santander turned over €52million whilst airline group IAG were the second most traded stock and energy companies Repsol and Total Energies were also both in the top ten.
The Stoxx 600 finished the week up 1.7% reaching a new record high. Madrid was also very busy on Friday in particular as the Ibex 35 rose 2.5% on the week.
This week …
Could see plenty of volatility. Even if we ignore the Middle East for the moment, this week we have interest rate decisions from the Federal Reserve along with the Bank of England and the central banks of Japan and Australia. Only Japan is expected to raise rates. It is the first FED meeting for Kevin Warsh since he was appointed chairman of the Federal Reserve. As a Trump appointee, Warsh was seen as someone who was more likely to cut rates. However, with rising energy prices and the knock-on inflationary impact, markets now price in an interest rate increase by the end of the year. It will be interesting to hear what he has to say this week.
Tuesday will see an update from the ZEW Economic Sentiment Index in Germany and on Wednesday we’ll get the latest US retail sales figures. Unemployment and inflation numbers are also due from the UK. On Friday the US markets will be closed along with Helsinki and Stockholm.
So we were set for a fairly busy week of Economic events anyway. The main driver of volatility this week will almost certainly be the Middle East peace deal. Rumours that a deal was close began at the tail end of last week and resulted in a busy day on Friday. Over the weekend we’ve had confirmation that an agreement has been reached. So expect a busy open on Monday. The deal won’t be signed until Friday however. A lot could happen between now and then.
Hopefully the deal will be signed and markets will start to rise even further. There is the possibility however, that something else happens before Friday that could throw a spanner in the works. There are many moving parts involving several different players and some of them want different things from this peace deal. If it does hold it will take time for energy supply levels to return to normal, so don’t expect energy prices to drop too quickly. Inflationary pressure will take time to subside. US markets were already at record highs and European markets had recovered much of their losses. It will be interesting to see how much higher markets will rise in the coming months if this conflict is indeed over.
That’s all from me, until next week… Happy investing!
Carl
