No WW3 and WPP

The avoidance of World War 3 has created an eerie calm across the markets. The limited and targeted strikes in Syria that provoked no serious response from Russia were a relief to markets that were pricing in escalation. Stocks fell across Europe but that may have been more a function of a resurgent euro than concern about Syria. If it really is “Mission Accomplished” as Trump says, markets can stop worrying and move on. We are now looking for signs the market can finally refocus on strong earnings without the geopolitics.

WPP led a decline in the FTSE 100 where the rising value of the British pound was a problem for British-based multinationals. A seven-day winning streak saw the pound strike 1.43 against the dollar for the first since January. Banks were amongst the worst-performers despite some well-received quarterly results from their cousins on Wall Street. JP Morgan and Citigroup beat Q1 earnings estimates last week.

Not to overplay the maritime analogy. A rudderless WPP without Martin Sorrel at the helm isn’t very attractive when markets are in choppy waters. Breakup risk is very tangible. The multitude of smaller advertising agencies that make up WPP may go their own way with Sorrel binding them together. If there is going to be any advertiser backlash against Facebook for its privacy scandal, we don’t think WPP will be in a position to best take advantage without Sorrel. 

The dollar lost ground against most major currencies despite a pickup in US retail sales in March. Now that a US-Russia confrontation has been avoided in Syria, FX traders are cutting back on the need for dollars as a haven.

Oil prices pulled back after a weeklong winning streak. Brent crude oil fell after a five-day winning streak as risks to Middle Eastern supplies receded following the airstrikes. For now we think this oil pausing for breath rather than the beginning of some great unwind. The support for Syria’s Bashar al-Assad puts Iran square in the firing line for the re-introduction of sanctions on its energy exports.

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