US Overview

Stocks recovered a portion of the previous week’s steep losses and recorded solid gains. The week was notable for a sell-off in high valuation technology companies, however, which caused the Nasdaq Composite to lag the other benchmarks. A steep drop in Amazon caused the consumer discretionary sector to join technology and energy stocks among the week’s laggards in the Standard & Poor’s 500 Index. Defensive consumer staples stocks performed well, on the other hand, as did real estate and utilities shares, whose heavy dividends became more attractive as long-term bond yields decreased.

The week got off to a very strong start as the trade war fears that led to much of the previous week’s volatility appeared to fade somewhat. Investors were encouraged by China’s decision—for the time being, at least—not to establish retaliatory tariffs on its imports of U.S. soybeans and commercial aircraft. Reports of talks between Chinese and U.S. officials on opening the Chinese market to U.S. goods and protecting US firms’ intellectual property rights were also encouraging. Monday saw the S&P 500 Index notch its best daily gain since August 2015, but the firm’s traders noted that trading volumes were somewhat disappointing, perhaps indicating a lack of broad conviction in the rally.

Indeed, the market gave back a good portion of its gains on Tuesday with a late-day sell-off in the technology sector. The primary culprit appeared to be a report that the Trump administration was considering a crackdown on Chinese investments in US firms with technologies deemed necessary to national security. Speculation has grown that the administration is pushing back against the Chinese government’s plans to dominate emerging technologies and industries, such as artificial intelligence.

Europe

The leading European stock indexes regained some ground for the week but finished the month and the first quarter with losses. The UK blue chip FTSE 100 index led the way, picking up just over 2% heading into the four-day Easter weekend (European markets were closed on Good Friday and will be for Easter Monday), while the pan-European STOXX 600, German DAX, and French CAC 40 each added more than 1%.

Japan

Japanese stocks gained in the four days ended March 29, recovering some of their losses from the previous week. The Nikkei 225 Stock Average climbed 2.6% in the four trading days. However, all of the major Japanese market indexes remained substantially in the red for the year to date. The Nikkei was off 7.1%, the broad-based TOPIX Index was down 6.3%, and the TOPIX Small Index had declined 5.7%. The yen strengthened and closed Thursday’s trading at ¥106.44 per U.S. dollar, which is about 5.6% stronger than the ¥112.7 per dollar level at the end of 2017.

An opinion poll conducted by Nikkei/TV Tokyo showed that support for the cabinet of Prime Minister Shinzo Abe plunged by the largest monthly amount since Abe became prime minister in late 2012. The government has become entangled in a scandal related to the finance ministry altering documents related to the sale of public land to a nationalist school operator. Abe’s Liberal Democratic Party (LDP) will hold an election to select its next president by September, which will measure the prime minister’s power within the LDP.

China

Trade related concerns between the US and China persisted after the Trump administration announced plans to impose tariffs on $50 billion to $60 billion of Chinese imports and restrict Chinese investments in US technology companies earlier this month. The measures, which led China to promptly announce (but not yet implement) retaliatory tariffs of its own, have stoked fears of a spiraling trade war between the world’s two biggest economies.

The overall impact of the tariffs will likely fall well short of the headline $50 billion and depend on how consumers and producers respond to changing relative prices and to what extent substitutes are available. Much of the damage may result from the uncertainty resulting from possible tariffs and its impact on investment decision-making over time.

All the best

Stuart

CEO

Farringdon Group

+60 3 2026 0286