Week in review: investors feeling flush

Strong economic data and good news on corporate earnings overcame investors’ worries about the coronavirus, pushing share prices up in several developed markets. US and European stocks both touched new record highs during the week. The S&P 500 Index had climbed 1.39% by Thursday’s close. In Europe, the FTSE World Europe (ex UK) Index was 1.16% higher.

President Trump attempted to raise the stakes with his new $4.9 trillion fiscal budget for 2021. It includes funding for a mission to Mars, more spending on defence and $2 billion for one of the projects closest to his heart – the border wall. On the other side of the coin, there are cuts to social welfare, overseas aid and environmental protection. It’s not uncommon for Presidential budget proposals to be ignored in Washington and scorn came in spades for this one. Far from declaring it a diamond in the rough, Democrats said it was “dead on arrival”. Unlike all those Valentine’s Day bouquets, we hope. In profits news, Allergan, CVS and Hasbro were all in the ‘beat expectations’ club.

Uneasy lies the head that wears a crown

Jay Powell, chairman of the Federal Reserve (Fed) was also in the optimistic club. Addressing Congress, Mr Powell said that the US economy is in “a very good place”. He did caution, however, that the central bank is watching closely for potential risks from the new coronavirus. Coronaviruses are so-called because their particles have spiky projections that stand out in a crown-like formation. The World Health Organisation has finally given the one that emerged in Wuhan, China its own name: Covid-19. Many Asian markets performed well early in the week, although news of a sharp rise in infections tempered gains on Thursday. The financial press attributed the spike to a change in the way that officials are counting cases. Over the week, the Shanghai 180 Index gained 1.09%.

Shuffling the pack

On the other hand, shares in UK companies were slightly down. The FTSE 100 Index dropped 0.2% over the week to Thursday’s close, as political uncertainty continued. Prime minister Boris Johnson went all-in with a major cabinet reshuffle. Among those to depart were Northern Ireland Secretary Julian Smith, Business Secretary Andrea Leadsom and Attorney General Geoffrey Cox. The most surprising departure, however, was Sajid Javid. Mr Javid decided to cash in his chips as chancellor just four weeks before the UK budget, after declining to dismiss his team of aides on the prime minister’s orders. He was replaced by the Chief Secretary to the Treasury, Rishi Sunak.

Sterling rose 1.4% versus the US dollar and the 10-year UK government bond yield increased 10 basis points to 0.65% trough-to-peak during the week. Investors had been expecting the government to chip in with more fiscal spending. News of no economic growth in the final quarter of 2019 also added to the gloom. On an annual basis, however, the economy expanded 1.1%. Manufacturing remained a headwind, too: industrial production contracted 1.8% in December, and 2.5% on a year-on-year basis. Despite Brexit, this is a trend shared with Europe as industrial output on the continent fell 2.1% in the same month.

In company news, oil giant BP played its green card. The company has promised to cut emissions to net zero by 2050, but provided few details on how it will do so.

And finally…

Whether cunning is in short supply in the UK Parliament is a subject that’s up for debate. Last Friday, however, a lost fox had MPs going to ground in Portcullis House, the building where many of them have their offices. The vulpine visitor made his way to the fourth floor, pawsing to have a look into a staff cafeteria on the way. Many MPs took to Twitter to describe their meeting with Reynard, who was later escorted from the building to be released on the banks of the River Thames. Let’s hope none of them are feeling out-foxed by their brush with nature.

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