"Sweet April showers do spring May flowers", Thomas Tusser, we hope

Market wisdom is to sell in May and go away, however ahead of the Federal Reserve’s rate setting meeting, equity markets on Monday had a good start to May. The Vix or fear and greed index fell on Monday to its lowest level since before the credit crisis as the broader US market closed at yet another all-time high. Despite the amount of uncertainties that surround global equities this has been one of the least volatile starts to the year for many a year.

Purchasing manager surveys are considered a forward-looking indicator for economic growth, and the final readings for the previous month are released on the first days of the new month. Taking a brief trip around the globe, and starting with the largest economy in the world the Institutes for Supply Management’s headline Manufacturing index for April fell to 54.8 in April from 57.2 in March and below forecasts of 56.5. A subindex linked to employment conditions contained within the report retreated from 58.9 to 52.

This added to the slightly weaker data we saw from China over the weekend. On the plus side 54.8 is comfortably above 50, which continues to suggest the US economy is expanding. Moving across to Asia April PMI’s continue to underline that the regions manufacturing recovery remains solid.

Moving back closer to home, the euro area PMI data came in line overall with expectations. The reading for the region overall was 56.7. Also, released on Tuesday was the harmonised unemployment rate for the German economy. This records the unemployed people of working age who are without work, are available for work, and have taken steps to find work. The rate remained at 3.9%, which compared to an unemployment rate of 9.5% for the rest of the Europe. The divergence in employment rates between Germany and the rest of Europe will continue to push inflationary concerns amongst German finance ministers for their home economy.

Returning to these shores, in contra to some of the recent data, Markit’s estimate for UK manufacturing came in at the year high of 57.3, well ahead of the forecast 54 and last month’s reading of 54.2. Services not manufacturing is by far the larger contributor to the strength of the UK economy, and Markit release their estimate for services PMI on Thursday. However according to Markit, the start of the second quarter saw a solid improvement in the performance of the UK manufacturing sector. The impact of the exchange rate movement contributed to solid increase in new export business, but also had an impact on cost pressures. Manufactures encouragingly managed to pass on higher costs to clients.

The Federal Reserve start their two-day meeting on Tuesday, later Wednesday they announce their rate decision. No change is expected to rates this month the question will if the press announcement reinforces the view that the next move comes in June.

Posted on May 2, 2017 .