June 12th – Weekly Update

  • In a twist the favorite FANG tech stocks got slammed on Friday raising concerns about tech stocks in general that have dominated 2017’s market. Despite this U.S. equity markets finished flat; oil and gold dipped and the 10-year U.S. Treasury yield closed at approximately 2.21%.
  • The market took major geopolitical events in stride at the start of the week, with little notable reaction to the recent terror attack in London or to Saudi Arabia and several of its allies cutting ties with Qatar over alleged terrorist and pro-Iran links.
  • The UK election provided a big upset with Conservative PM Theresa May underperforming broad expectations. Predictably, speculation mounted over May’s future, but she defied calls to resign, with some of the voices coming from within her own party. It is widely thought that May’s role is now one of a caretaker prime minister rather than a long- term leader, which heightens the risk that the UK will struggle to negotiate a Brexit deal by March 2019, when it is due to leave the European Union.
  • In line with expectations, the European Central Bank (ECB) announced no changes to its key policy settings following its meeting during the period. However, the central bank removed a reference to lower rates beyond the end of its quantitative easing program and said it considers risks to be “broadly balanced.”
  • The ECB’s economic projections for eurozone GDP growth were largely in line with consensus, and there was a downshift of inflation projections (a somewhat sharper downward move than had been anticipated) on lower energy prices. ECB President Mario Draghi reiterated his view that inflation remains subdued and has yet to show a convincing upward trend.
  • Saudi Arabia and several of its Persian Gulf allies cut diplomatic ties with Qatar’s due to alleged support for terrorist and pro-Iran groups. Efforts to mediate the dispute have thus far not defused what some are calling the region’s worst diplomatic crisis since 1991.

CPWM Weekly Market Monitor (2017.06.12)