In an unexpected move the Greek government has calculated that Germany owes it nearly €279 billion in war reparations for the Nazi occupation, the call from Athens has been disregarded by the German economic minister as nonsense, however the German opposition party feel that Berlin should repay a forced loan dating from the Nazi occupation, this loan is in the region of €11 billion. A positive move for markets was that the Greek state made the €450 million loan repayment due to the International Monetary Fund, allowing Greek bonds to enjoy a bit of a rally

The continuing policy of low interest rates remains a key support for financial markets. Although price earnings multiples have crept up somewhat, equities remain well valued when compared to cash and bonds. Euro currency weakness has continued to reward investors who hold foreign assets. As it looks increasingly likely that the US and the UK will begin to raise interest rates towards the end of the year, we expect that volatility in markets may increase from current low levels.

Equities
• Equities continued their phenomenal growth in March rising for the fourteenth straight month; they passed the sixth anniversary of the current bull market on the 9th of March. Eurozone markets were supported by the ECB’s decision to begin QE as well as some stronger than expected economic data.

• World equities rose by 2.8% in March and have given a total return of 15.3% during the first quarter of 2015. Euro currency weakness was a major contributory factor. There was a mixed bag of returns for the major markets in local currency terms during the period ranging from plus 2.9% in Europe to minus 2.5% in the UK.

Bonds
• The German 10-year bond yield fell again in March from 0.33% to a new all-time-low of 0.18%. Equivalent US rates fell marginally from 1.99% to 1.92%. The gap between the German and the US 10-year yield is close to its highest level since German re-unification in 1990.

• The Federal Reserve is expected to keep interest rates at record low levels until December 2015, with a 40% chance of a rate rise in September. The Bank of England is not expected to move until closer to year-end or possibly early 2016. Eurozone rates will stay at current ultra-low levels for the foreseeable future.

Commodities
• Commodity prices overall were down by 5.4% in March following a slight bounce back recovery in February; so far in 2015 they are down by 7.9%.

• The gold price fell by 2.5% in March, ending at $1,183 per troy ounce. Gold had reached an all-time high of $1,889 in August 2011.

Brent crude oil price rose 5%, to $56.69 a barrel. The energy sector was buoyed by news of Royal Dutch Shell’s takeover bid for BG Group. The bid values BG at £47 billion, which represents a premium of close to 50% on the previous day’s close.

• The euro currency continued its downward trend in March and was weaker against all major currencies. The €/$ rate moved from 1.12 to 1.07 over the month. The expectation of them being on par by the end of the Summer is now a foreseeable reality.

The last week in the markets

Market April 15

Source : Bloomberg – 10th April 2015.