A strong week for equity markets, dominated once again by Greece, the Federal Reserve and large corporate deals. Royal Dutch’s acquisition of BG group attracting most of the news headlines. GE on Friday announcing it was exiting its finance division, raising $90bn in the process caused the shares to rise by over 35%. The FTSE 100 finally cleared the 7000 hurdle and seemed happier this week to hang on to the level, despite increased concerns for the outcome of the upcoming election.
The FTSE 300 euro first index rose over 3% on the week, as confidence grew that the Greek government would find 500 million euros to meet the IMF payment. This week Greece will probably remain in the news, as it faces two redemptions of bills for a total of 2.4 billion euros over the coming days. US equities were boosted by better a better week for economic reports, along with the dovish tone to the minutes of the last Federal Reserve meeting.
Fund flow data indicates investors continue to favour European equities to those of the US, but overall despite the strong performance of equity markets inflows into equities remain behind that of bonds. For the 68th week on the trot investment grade bonds saw net inflows. The vix fell on the week, at 12.5 it once again trades close to the bottom end of its range. The weekly AAII retail investor survey recorded a sharp fall in bullish sentiment. On Friday a Citi research report expressed the view that the continued lack of bullish sentiment from retail investors is an encouraging sign.
Alcoa kicked of the q1-reporting season this week with earnings pretty much in line with expectations; over the next few weeks’ earnings will dominate headlines. A combination of a fall in the oil price, and a strengthening of the US dollar have seen analysts downgrade earnings expectations for the first half of the year. Equities have continued to rise despite the lack of earnings growth, which if continues will be cause for concern. Investor’s hopes are pinned on an improvement in the global economy as the year progresses. This week will see the focus on the banks, starting with JP Morgan and Wells Fargo on Tuesday.
Macro events this week will start with Chinese export import data on Monday, on Tuesday the latest US retail sales information. This is a busy week for US macro; the highlights will be on Wednesday industrial production data for March, and on Friday the inflation data also for the month of March. We also see the latest industrial production data for the euro area on Tuesday, and inflation on Friday. On Wednesday the latest ECB rate decision, no change is expected from the ECB. The election will dominate the UK in the coming weeks but it also a busy week for macro data in the UK, the highlights being inflation on Tuesday and average earnings on Friday.