Another poor week for equity investors, the FTSE 100 fell almost 2%, the eurofirst 300 almost 3%, the S&P 500 once again performed a little better falling just about 1%. The FTSE 100 did however hold the 6000 level. We talk a lot about sentiment and as Mr Aurthers points out in the Financial Times on Saturday this recent rally does not appear to have changed the negative mood a great deal. Lipper data reported $11bn dollars came out of US equity funds last week, taking the figure to $60bn dollars in the year so far. We reported this week how just 22% of those polled in the weekly AAII investor poll think the equity market will be higher in six months’ time.
As we enter May the equity market may well start to focus on two events in June, Brexit and whether the US will raise interest rates next month. At the moment, despite what looks to be an improving economic picture from the US, capital markets are pricing in a very small probability of the Fed moving in June. This view appeared to be reinforced by the weaker than expected pay roll and unemployment report out on Friday. Speaking this week are several Federal Reserve members, and the commentary from the group in the past weeks has changed from the start of the year. It will be interesting to hear if this week’s speeches will continue to float the idea of a June rate rise, and what will be the reaction if they do.
The week ahead is another busy one for macro data, taking our usual trip around the globe starting in America, the focus this week will be on the consumer. Wholesale inventories are the stock of unsold goods held by wholesalers, a high number indicates economic slowdown a low number points to better growth. This year the level has been falling, last month’s reading was -0.5, the forecast for March is plus 0.2, this will be the first uptick this year. This week we also get the NFIB small optimism index, the optimism index has been falling almost into pessimism so far this year. We love looking at these surveys, they often provide marvellous contra indicators for equity markets. Optimism peaked last year in this survey about a month before the equity market suffered its August sell off. Finally, at the end of the week retail sales for the month of April as well as Michigan consumer confidence.
For Europe Thursday and Friday will be the key dates this week, firstly industrial production comparisons for the month of March. On Friday we get the second estimate for Q1 GDP growth for the region. Consensus expectations are for no change to first estimates of year on year growth of 1.6%.
Moving onto the UK economy, on Wednesday industrial and manufacturing data for the month of March. On Thursday the release of the Bank of England minutes from the last rate setting meeting, as well as the latest interest rate decision.
The strength Japanese yen has been the subject of much debate in financial markets on Monday the minutes of the last Bank of Japan policy meeting minutes were released. The minutes revealed a spilt of views on the effects of negative rates, this may go a small way to explain why so far further measures to stem the yen’s rise have not been introduced. Finally, China, on Wednesday April’s inflation data is released.