The tragic events in Brussels took over everyone ’e thoughts as the Easter weekend approached The Budget, Brexit and Ian Duncan Smith’s resignation, which had dominated the headlines all seemed rather trivial by comparison.
George Osborne and David Cameron have both come in for a fair degree of stick in the past few days, as the Brexit vote is starting to look like it could leave the conservative party in tatters. The vote itself may become a minor issue compared to the damage the party is doing to itself in the lead up.
So far the pound and the gilt markets have taken the implications of the fallout pretty calmly, with limited movement in the pound against the euro. It has fared slightly worse against the dollar but this is in part to some recent strength in the US dollar against all currencies.
The Chancellors position is now being called into question as speculation grows he may now be moved to the Foreign Office, according to the FT. This is a Chancellor who can claim to be presiding over the fastest G7 growing economy, inflation close to zero and strong employment. Under other circumstances, the expectation George Osborne could leave his post should cause some waves.
The latest UK inflation figures for February came in exactly as anticipated, the year on year inflation rate was 0.3%. Producer prices input index fell 8.1% year on year the output only fell 1.1%. That should in theory indicate manufactures costs have fallen faster than output prices, and be a positive sign for company margins.
Markit released on Tuesday their US manufacturing flash Purchasing Managers Index estimate for March. The figure of 51.4 was in line with expectations. Macro data from the States continues to be inconsistent. On Monday the latest release of existing home sales for February recorded a sharp drop, however other factors such as weather could have played a part.
The S&P 500 index is now not cheap again, at 17x its forward price earnings multiple. Fears will once again appear that the index level is more dictated by liquidity and less by fundamentals. Federal Officials seem once again determined to make themselves hostages to fortune. Overnight two officials suggested that the Fed may now look to raise rates in April, against expectations.