Market Summary
Asia
Asian markets had a mixed week, but ultimately ended broadly higher, with major indices rebounding from the sharp losses suffered the previous week. Chinese markets did especially well, with investors buying ahead of the Chinese Lunar New Year that has mainland Chinese markets closed from February 15 through February 22. The Shanghai Composite finished the shortened holiday week with a 2.2% gain, but in Hong Kong the Hang Seng did far better, gaining 5.4% through mid-day Thursday, when the market closed for the Lunar New Year holiday. South Korea also had a short three session trading week, with the Kospi adding 2.4% during that time. The two markets that remained open all week were the underperformers. Australia’s S&P/ASX 200 struggled and lagged the region with a 1.1% gain. Japan’s Nikkei had Monday off for a holiday, then fell for two consecutive sessions before rebounding to close the week with a 1.6% gain, despite the Yen trading at a 15-month high versus the USD.
The coming week will see most markets across Asia closed until Thursday as the Chinese Lunar New Year celebration continues. Australian markets will be open for trade, however; but with volumes likely low we could see the market sliding in the beginning of the week. Japanese markets will also remain open, and while investors didn’t react to the strengthening Yen at the close of last week, they could begin selling export related shares at the beginning of the week if the Yen remains stubbornly strong.
Europe
European markets had a solid week, rising in four of the five sessions and rebounding from the the previous week’s selloff. In fact, it was the best weekly performance in 14 months for the broader European indices, and also the first winning week in the past four. The pan-European Stoxx Europe 600 had an impressive 3.9% weekly gain, and the CAC 40 in France tracked that as it added 3.9% for the week as well. Germany’s DAX and the FTSE in the U.K. saw more modest gains of 2.8%, but it was still enough to erase more than half of the losses from the previous week.
The coming week could be a struggle for European equities as the Euro and Pound have been strengthening against the U.S. dollar once more, and this will put pressure on export companies and multi-nationals. We can expect quiet trading on Monday as U.S. markets will be closed and that will lower volumes in Europe. Tuesday may also be quiet as investors await European inflation data and U.K. employment data to be released Wednesday.
US
U.S. markets rose throughout the week, with the S&P 500 and Dow notching a six-session winning streak as they gained 4.2% and 4.0% for the week respectively. The Nasdaq snapped a five-session winning streak with a loss on Friday but still outperformed for the week as it gained 5.2% on a weekly basis. These weekly results were the best weekly gain for the Dow since November 2016, for the S&P 500 since January 2013, and for the Nasdaq since December 2011. It also nearly erased the losses of the previous week and put the major benchmarks back in positive territory for the year.
The coming week will see U.S. markets closed for a holiday on Monday. The late drop on Friday due to political reasons should be forgotten by Tuesday, which will allow equities to continue their rally, barring any other negative news over the weekend or on Monday.
Gold/Crude Oil
Gold had an excellent week as it continued rising in response to U.S. dollar weakness and safe haven demand from uncertain investors. On a weekly basis, gold gained 3%, which was the best weekly gain for the yellow metal since April 2016. Investors have begun to appreciate gold more as inflation in the U.S. looks to be picking up faster than previously thought. Gold has historically been a hedge against strong inflation. Crude rebounded from the losses of the previous week, with the global benchmark Brent crude gaining 3.3% and the U.S. benchmark West Texas Intermediate crude adding 4.2%. Crude finished up the week with three winning sessions as traders seem to be more focused on rising demand for crude than rising production. Still, Brent crude is 6.1% lower in February, while WTI crude has a 4.7% monthly loss.