1 to 7 May: Out of Sync?

Europe, the sick man of global markets, is on a tear with stronger data, reduced political risk and some of the best performing equity indices in the world. Meanwhile, this week commodity markets posted sharp falls as the glow of the first round French Presidential election result gave way to demand-side concerns based on weaker Chinese and US data. This included oil touching a 5-month low and the worst 2-day decline in base metals since 2015.

We think the world may remain “out of sync” for a while. For example:

• Interest rate hikes are set to continue in the US, whilst in early cycle Latin America we should see easier monetary policy.
• Assuming the ECB does not move aggressively in June, Europe’s economy should continue its sentiment driven, counter-trend purple patch for a few quarters, whilst growth moderates in the UK as the country deals with the Brexit transition.

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