Weekly Market Overview – Markets shrug off US strikes on Syria

Mon 16 Apr 2018

Markets were volatile last week due to the possibility of air strikes on Syria, however opened slightly up on Monday morning after the US took action over the weekend. Equity markets were positive across the board in local terms last week, however Emerging Market and Japanese equities posted losses in GBP terms as the Pound rallied strongly against both USD (+1%) and JPY (+1.4%). UK equities lead with gains of +1.2%, followed closely by US equities at +0.9% and global equities with +0.6% (+2% and +1.8% in USD respectively). European equities posted marginal gains of +0.3% in Sterling and +0.9% in EUR. Japan and EM equities fell -0.8% and -0.4% respectively in GBP terms. Last week was another negative week for bonds, with US 10Y Treasury yields up 5.3 bps, UK 10Y Gilt yields up 3.9 bps and 10Y German Bund yields up 1.4 bps. Meanwhile oil jumped +8.6%, followed by metals (+2.9%) and gold (+0.9%). However, oil prices have since fallen as the restricted nature of the strikes tempered concerns about a possible flaring of tensions.

Equity market behaviour in the lead up to and following the US strikes on Damascus followed a well known pattern of selling off on concerns about the event, but rallying once something actually happened. In this case the attacks seem to have been more of a warning shot that the West will not condone the use of chemical weapons, so that the damage, and hopefully any retaliation by Syria and possibly Russia, was extremely limited. US futures were up in Monday morning trading, while US 10 year Treasury yields have risen to 2.85%, indicting that markets are not unduly concerned. However anyone that reduced their positions last week on concerns about escalation will likely have seen their returns curtailed. This shows the value of looking through individual geopolitical events and investing for the long term.

Read our full Market Update Week 15