It’s all getting a bit tiresome, isn’t it? Many global stock markets hit yet another succession of fresh highs this week. The strongest returns came from Asian markets, with the MSCI Pacific Index up 1.4%. Of the major regions, only Europe failed to rise, and even then it held steady. Bulls are relishing the rude health of the markets even as bears fret about stretched valuations.
In fact, such is the mono-directional nature of markets in recent months that a mere one-day fall can spark considerable comment. That was the case on Wednesday, when both the S&P 500 and the Nasdaq registered their first single-day declines of the year.
One of the spurs for this short-lived sell-off was news that China might reduce or even stop its buying of US Treasury bonds. Such a move, reportedly mulled by unnamed officials in Beijing, would put upward pressure on US borrowing costs. This comes at a time when the US Treasury is going to be in urgent need of cash to pay for President Donald Trump’s tax cuts.
Another cause for concern was the North American Free Trade Agreement (NAFTA). Canadian officials are reported to have voiced fears that Trump might pull the US out of NAFTA, the trade agreement that is currently being renegotiated with Canada and Mexico. These reports amplified the downward pressure on US equities on Wednesday.
But any thought that the market’s slide might be more than a blip was dispelled on Thursday, however, as both the S&P and the Nasdaq rebounded with vigour. The S&P was up 0.9% by Thursday’s close.
Across the Atlantic, the story was similar. Although it fell back on Monday, the UK’s FTSE 100 broke new ground on each of the three following days to finish 0.5% higher by the end of Thursday. Enthusiasm about high-street retailers helped to put a spring in the Footsie’s step, after supermarket operator J Sainsbury reported good Christmas sales and raised its full-year profit guidance.
As the prices of copper and iron ore rose, mining stocks also did well. Anglo American, Glencore, Rio Tinto, Antofagasta and BHP Billiton were all among the week’s top performers. Shares in housebuilders fell, however, with Taylor Wimpey, Barratt Developments and Persimmon all down on concerns about rising construction costs and weakness in the housing market.
On the political front, the week began with an awkward reshuffle of Theresa May’s cabinet, in which several ‘big beasts’ reportedly refused to change jobs. It ended with the news that Donald Trump would not be visiting the UK to open the new US embassy in London. Mr Trump tweeted that the location of the new embassy was a “bad deal”, but others pointed to a souring of US–UK relations after Theresa May criticised Mr Trump’s retweet of a message from a far-right UK group.
Talks about talks
Europe was the big exception to the general exuberance in markets. The FTSE World Europe (ex UK) index was unchanged for the first four days of the week. The week’s main news was positive, however, with Germany making progress on the political front. Angela Merkel’s CDU, Horst Seehofer’s CSU and Martin Schulz’s SPD made a breakthrough in preliminary talks about the formation of a coalition government. The three leaders will now ask their parties for permission to begin official negotiations over a coalition deal. This could bring to an end the stalemate that has persisted in German politics since last September’s inconclusive election.
And finally …
This week’s big event in publishing was the launch of Michael Wolff’s Fire and Fury, his much-anticipated account of life in the Trump-era White House. Despite an attempt to block the book’s publication, it sprang to the top of the bestseller charts this week.
But there was good news, too, for Randall Hansen, a professor at the University of Toronto and the author of – wait for it – Fire and Fury. Ten years after its publication, this book has been propelled onto Amazon’s bestseller lists by a horde of over-enthusiastic punters who evidently don’t bother with subtitles.
The full title of Professor Hansen’s work? Fire and Fury: the Allied Bombing of Germany 1942 –1945.