Markets around the globe struggled to maintain their recent upward momentum this week. In the U.S. poor economic data sent markets on a spiral before recovering most of their losses on Friday. Materials and Energy were the leading sectors this week.
Fixed income markets joined equities in posting losses this week across major markets. Yields on US and European bonds rose to some of the highest points this year. Analysts speculate that rising employment cost data in the U.S. and rising inflation data in Europe will lead to tightening cycles.
GDP growth for Q1 in the U.S. came in as a major disappointment at 0.2%. Expectations were for growth of near 1%. The Fed’s statement released on Wednesday cited transitory factors as impeding growth.
China is preparing a new credit channel that will allow banks to swap local government debt for credit per the Wall St. Journal. Balance sheet exposure to indebted and cash-strapped municipalities leaves banks vulnerable to non-performing assets.
News broke early in the week that PM Tsipras of Greece was reconfiguring the role of Finance Minister Varoufakis at the behest of EU parties. The poor relationship between the finance minister and his counterparts is blamed for the lack of progress on a reform package and the release of bailout funds. Indications emerged this week that a deal could be reached between both sides by next week, involving a 51% sale of Greece’s two largest ports.
Rising consumer confidence, prospects of a deal with Greece and some good GDP numbers from Spain pushed the Euro up versus the dollar this week. The dollar’s rise over the past year has been frequently cited by U.S. multinationals as a hurdle to growth. The greenback’s fall has also boosted commodity prices and related businesses.
The U.K. reported weak GDP growth this week, roughly one week before Britain goes to the polls.