An indifferent week for equity prices, the leading developed equity markets of Europe, the US and UK all marked time last week. More conflicting economic data out the US, as a disappointing payroll report on Friday added to concerns that the US economy is slowing down rather than picking up pace into 2015. Post the employment report yields on the 10 year US treasury fell back to 1.84%, the lowest since February. Just as capital markets were discussing “when” not “ if” rates would rise in the US in 2015, the recent data would imply “if” may be coming back into question.
On the plus side, as we pointed out in our blog this past week, we believe that the expectations for the US in the coming quarter may have fallen enough for some potential positive surprises helping to allay some of those fears. Having said that we may have to wait for the April data to start to come through to confirm this view.
On Monday whilst the UK will be enjoying the remains of the Easter break; Markitt will release their final PMI’s report for March. Analyst’s expectations, despite the recent weakness in US data, are still for an uptick in March from the previous months figures. Wednesday see’s the release of the minutes from the last Federal Reserve meeting. The minutes should offer insights to the decision to remove the word patience, and how they felt the market might react to the dropping of the word. The minutes may go part way to explain the very dovish nature of the accompanying comments from Janet Yellen.
A slightly quieter week in Europe, but as is the case for the US, Markit’s will release of final Purchasing Managers Index readings for the services and composite sectors of the euro area economy. Monday sees the latest release of the Sentex investor’s sentiment index; expectations are for the best reading in 3 years. This bullish sentiment along with the recent inflows into European equities may make European markets more vulnerable in the coming weeks.
The UK is going to be dominated more and more by the upcoming General Election. On Tuesday we get the latest Halifax house price data, the subject of housing has become a hot topic in the lead up to the election and therefore the report should make headlines. On Thursday we get the latest interest rate decision announcement from the Bank of England, there are no expectations for a change in interest rates at this time.
One gets the feeling bricks are being added to the wall of fear as Greece continues to make headlines, US data continues to paint a mixed picture, and the UK faces an uncertain time into the General Election and possibly after it. No sooner does it feel the earnings season is over that the cycle starts again. On Tuesday, Alcoa as is the tradition kicks of the Q1 2015 reporting season.