Hot in the News

Major news for April:

Game of Thrones season 8 is finally available after almost 2 years of waiting.
The final Brexit decision is almost in sight after 3 years of waiting.
European elections, which was not anticipated, are now likely to happen despite the 2016 referendum.
The Tory and Labour party working together. Really?
The US could deliver a post Brexit trade agreement. Will Trump really help the UK or just the US? What has the last 2 years taught us?
The US recession, which was expected, might not happen yet.
North Korean leader is now friendly with Putin after trying to develop a relationship with Trump.
Climate issues with both Sir David Attenborough's emotional documentary film and Extinction Rebellion causing serious disruption across London.

UK: BREXIT

Another extension has been granted and the PM is working closely with the Labour leader to agree on a deal, what deal? The PM is to face a non-confidence challenge from the conservative party. Could this pose another challenge? Scotland is pushing ahead for a new independence referendum, again? And above all this, we could have another Brexit referendum!

These are difficult times for the UK economy with clear evidence that since the June 2016 vote, GDP growth has slowed down, productivity has suffered, the pound has depreciated and purchasing power has gone down while investments have declined. (LSE report March 2019)

As a result, for a majority of UK firms, Brexit is a growing source of uncertainty and is affecting their businesses.

The UK economy from January to March 2019:

Growth rose only by 1.4% with 2019 forecasts confirming at +1.2% (was 1.7%). Unemployment remains at 3.9%, its lowest level since 1974/75. Annual Wage growth remains stable at 3.4% a direct link to an unchanged level of inflation. Furthermore, Inflation (CPI) remains at 1.9%.

To summarise, UK growth remains within the middle of the G7 countries, but everything is still impacted by the Brexit negotiations and economic predictions are almost impossible until the market has a better vision. Financial markets including the Sterling will remain volatile.

Money Market fund managers (29/04/2019) GBP weighted average maturity (WAM) is about 47 days (next BoE meeting 2/05/2019) so market is definitely not favouring a rate increase.

Europe:

For the EU zone (19) Inflation is stable at 1.6% in March. Unemployment remains unchanged to 7.8% in February & the Euro zone's PMI is slightly up, to 47.80 in April (was 47.5% in March). February Growth up to 0.2% with 2019 projections now stands at around 1.1% (was 1.7% in December).

Germany barely escaped recession by the end of 2018, but the first quarter of 2019 has seen some surprising improvements with: Growth expected to be up by 0.4% (recent annual forecast was around + 0.5%.). Purchasing manager index (PMI) improved slightly to 44.5% in April from the previous month’s seven year low of 44.1%. March unemployment rates remains strong at 3.2% but inflation in April accelerates to 2.1% up from 1.4% in previous months.

USA:

For the first quarter of 2019: Growth is up to 3.2% mostly driven by stockpiling due to the threat of trade war with China. Unemployment remains unchanged at 3.8%. Wage growth slowed down to 3.2% from 3.4%. Inflation went up slightly, up to 0.4% in March with 12 months March CPI, ending at 1.9% compared to 1.5% in February. Core inflation was down to 1.6% in March from 1.7% in February.

Topical Issues

BoE RateLIBOR £3mFTSE YieldGoldVolatilityLast MonthTodayLast MonthTodayLast MonthToday
TodayToday0.75% 0.75%0.83%0.83% 4.58%4.43% 127913.11%

Updated on 30/04/2019

Interest rates and markets:

Interest rates: Both Libor and inflation unchanged at 0.83% & 1.9% respectively with stable wage growth. Brexit continues to drive any economic decisions and we do not expect a rate increase at the next meeting in 2nd May.

Fed: 3 months USD Libor at 2.58% down from 2.60%. Today’s slope 3 months versus 10 years treasury has now began to steepen slightly again at + 0.09%. 2 year treasury up to 2.31% while the 10 year treasury is up to 2.55% from 2.43%. A slight flattening of the yield curve is probably lowering the probability of a recession but will need to be monitored in the coming months to assess any changes. We do not expect a rate increase at the 30th /1st May meeting despite increase in CPI number but lower core inflation.
ECB: As expected no rate increase at the last ECB monetary policy meeting of 10th of April 2019 and we still do not anticipate a change of economic policy before the end of 2019. For additional information, the German 10 year bund is back in positive territory but only to + 0.05%. We do not expect a rate increase on the 6th June 2019 monetary policy meeting.

Equity: What a turnaround, with December 2018 being the worse month for the US stock exchange since 1931, the first four months of 2019 shows that all indexes are in positive territories. This is mostly driven by the FED's announcement of no further rate increases.

UK & Europe: CAC 40 at 5,581,18% up YTD. FTSE 100 at 7,440 up 11% YTD.
USA: Both Dow Jones and S&P up YTD with the former up 14% YTD at 26,554 and the latter up 17% YTD to 2,943.

Currency:

USD/GBP at 1.29 up 1.3% YTD. The GBP is expected to fall versus the Euro and the USD because of political uncertainty. Any good news on Brexit will strengthen GBP.

Euro/USD at 1.12 down 2.1% YTD but a recent upside due to a better German GDP & CPI numbers.

GBP/Euro at 1.16 is up 4% YTD. Gains are limited as the Eurozone outlook shows signs of strength. Any good news on Brexit will strengthen GBP.

Gold is at 1279 and therefore is down 0.7% YTD. It eased due to stronger equity markets and lower risk sentiments, which are eroding safe-haven demands.

About Banks - April 2019

Metro bank: investors have been urged to block the re-election of current chairman.

Deutsche bank and Commerzbank: potential merger discussions have collapsed.

Standard Chartered: announces a $1Bn share buyback after its $1.1Bn fine in the US?

Santander: profit is down by 10% on Brexit and Argentina after announcing a €1.2Bn cost cut mostly in Europe.

Money laundering scandal takes toll on Nordic banks.

Contact our expert team for further market insights

Yann Gindre

Deputy Chairman

Contact our expert team for further market insights.

Akoni has not independently verified the information or data used in our rate review, which is based solely on public available information. Neither Akoni nor its advisors or officers are authorised to make any express or implied representation, warranty or undertaking as to the accuracy or completeness of this update. Furthermore the writer expresses his/her own opinion and not an investment advice.