By Daniel Grote of Citywire
Investors sent stock markets to new all-time highs this week as the bullishness sparked by Donald Trump’s election was reignited by the flurry of executive orders signed by the US president in his first days in charge.
Not that you would know it from the sea of red engulfing our exclusive Accumulator data table charting the progress of all the world’s major markets.
The Dow Jones finally broke through the 20,000 mark this week while the S&P 500 notched up an all-time high, as investors embraced risk and dumped safe havens like bonds and gold.
But the pound’s rise against other major currencies this week left UK investors with little to celebrate. Sterling has enjoyed a solid week, boosted first by the Supreme Court’s ruling the government must hold a parliamentary vote on the triggering of Article 50, then solid growth figures for the last three months of 2016 showing the economy has proved robust following the Brexit vote.
That left the dollar, euro and yen all trailing the pound over the five days to yesterday, as our Accumulator table shows.
The dollar lost the most ground to sterling, down 2.3% over the week, in the latest leg of its sell-off. The greenback is now the worst performing currency in the G10 this year, as investors fret over the prospect of US politicians talking it down, following Trump’s claim that the strong dollar was ‘killing us’.
The pound’s strength this week amplified losses for UK investors in the bond markets, and wiped out stock market gains.
Bonds were down heavily this week on fears over resurgent inflation that could eat into the value of their coupons. That has been driven by the flurry of activity from Trump in his first days of office, signing executive orders to reduce regulatory burdens on US manufacturers and clearing the way for the construction of the controversial Keystone XL and Dakota Access oil pipelines.
US treasuries dipped, although UK investors took a much larger hit thanks to the dollar’s fall. But it was the European bond markets that suffered the most, down 2.8% for UK investors, amplified by the euro’s slide against the pound.
German bunds are headed for their worst week since Trump’s election victory in November, while Italian government debt was particularly badly hit on fears the country could be headed for early elections.