Market Volatility Continues

The volatility experienced in markets since February has continued over the last week. The selloff in the US on Monday was driven by further pressure on tech companies, driven by comments by Donald Trump on Amazon. This could be a significant change of direction for a sector that has led the wider market since the financial crisis. The concern is now that political intervention combined with a consumer backlash over privacy may limit the ability of these companies to achieve the lofty growth in earnings forecast. For example, analysts are currently predicting that Amazon will achieve annual growth in earnings of around 85%, every year, for the next four years.

French GDP Revised Higher

A revision to French GDP for the fourth quarter of 2017, showed that the economy grew by 0.7%, raising the full year 2017 figure to 2.5%. The acceleration in growth was driven predominately by an improvement in net trade, where exports rose faster than initially thought. This is perhaps indicating that the improvement in the economy is currently being driven by external factors rather than internally generated demand growth. However, the employment situation is improving rapidly and should feed through the greater domestic demand in due course. While the unemployment rate in France is still relatively high at 8.9%, this has come down from 10.5% in 2015, and fell by 0.7% in the last quarter alone.

UK GDP

UK GDP growth was confirmed at 0.4% for the fourth quarter of 2017, unrevised from previous estimates. Surprisingly, growth was driven by increased fixed asset investment, in spite of weak business investment. The increase was attributed to the higher private dwelling and general government investment, perhaps suggesting that effort to build more homes is finally having an impact. Less encouragingly, net trade detracted from the overall figure as imports grew, but exports fell. While a significant benefit was felt by a weaker sterling at following the referendum vote, this has now passed with companies now fighting a currency that is stronger than it was a year ago. This makes their products less attractive to overseas buyers and may explain some of the weakness.

Market Data

As at 29/03/2018