It was a muted week for the developed markets of Europe and the US, but the recent rally in equities meant the FTSE All Share World Index managed to reach a five-month high on Wednesday. One exception to the week was the Nikkei index of top 225 companies which rose 4.3% in response to a weakening yen against the US dollar, ahead of next week’s Bank of Japan policy update. The S&P 500 finished the week approximately where it started, despite several disappointing results from some major names. The two highest profile names failing to meet expectations in the tech sector were, Alphabet (Google) and Microsoft, whose shares fell 7% on Friday. The old as well as the new disappointed the market as Caterpillar and General Electric also announced soft earnings reports. According to Factset approximately 25% of the S&P 500 companies have reported earnings, which so far have declined 8.9% year on year. Despite all this, the Vix index finished at 13.5 a fall of one point on the week. It was another good week for oil as the Brent Crude price closed on Friday at $45.
It was a quieter week for US macro data which mainly evolved around housing. Despite a weaker than expected housing starts numbers, existing home sales for March met expectations. The Conference Board leading index month on month came in at 0.2%, above last months of 0.1% but below the consensus of 0.4%. It is a busier week for US macro data this coming week as we get new home sales, Durable goods orders for March at the start of the week, as well as Markit flash Purchasing Managers Index reading for April. On Wednesday we get the latest Federal Reserve interest rate decision, expectations are for no change to rates again this month. On Thursday we get the first estimate for q1 GDP growth for the US economy, forecasts are for modest growth of 0.6%.
Europe in the past week was dominated by the ECB meeting and the apparent spat between Germany and the ECB over the use of negative interest rates. Europe was also in the news as President Obama waded into the Brexit debate with some strong comments which has received a mixed reception. As is the case for the US it’s a busy week in Europe for macro news. During the week we get German business climate and consumer confidence. Later in the week we get consumer confidence, economic sentiment, business confidence and industrial sentiment for the whole region. At the end of the week the latest unemployment rate for the euro area as well as the flash estimates for Q1 GDP, and finally the latest estimates for euro area inflation. Expectations are for year on year growth to be at 1.3%.
It’s a slightly quieter week for UK economic data except on Wednesday when we get to see the estimate for UK GDP Q1 growth, preliminary expectations are for the growth to be at 2.1% year on year. The S&P 500 index is touching the top end of its trading range once again, we might need to some better news this week for it to push on once again.