Another mixed week for equity prices as investors grapple with the varied economic picture, the Brexit unknown, the coming summer months and what may happen with US interest rates in June. The Financial Times reported over the weekend that investors are pulling money from equity funds at the fastest rate since 2011. Redemptions from stocks have hit nearly $90bn this year. The AAII investor survey bullish reading fell again this week; only 20% of those polled think the market will be higher in 6 months time. That is about as low as it goes looking back over time.
US equities sold off on Friday after some strong consumer data, retail sales increased 1.3% in the month of April as US consumer confidence jumped to an 11 month high. This led to a rally in the dollar as investors increased the odds on a rate rise in June. However, according to the financial Times investors are still only pricing the small possibility of a June hike. The US bond market was little changed on the week, the curve did flatten modestly as yields at the shorter end rose slightly on the week and 10 year yields fell back. The 10-year US treasury now yields 1.7%, close to the lows in the past year.
After a very mixed week for UK economic data and mark Carney hitting the headlines post his comments on a Brexit, gilts rose and yields fell again. The 10-year UK gilt yield is currently only 1.37%, less than half the FTSE 100 currently offers investors. Sentiment to what is the next move by the Bank of England appears to be no longer when is the first rise coming but are we likely to see the UK cutting again?
It is another fairly busy week for US economic data, U.S. Empire state manufacturing on Monday. On Tuesday consumer prices, a rise will probably increase speculation of a June rate rise. We also get U.S. industrial production in April. Wednesday sees the release of the minutes from the April Federal Open Market Committee meeting. Thursday offers a broad range of data, from employment, to manufacturing and leading economic indicators.
Closer to home it is also a busy week for economic data. On Tuesday we get a raft of inflation data for April, producer prices and the retail price index. The year on year core inflation rate is forecast to remain at 1.5%. On Wednesday we get average earnings and the March unemployment rate. On Thursday retail sales for April. Consumer data has been weaker than expected in the past few months; consensus is for a pick up in the month of April. On Friday CBI industrial trends orders.
When discussing Asia we tend to focus on China, on Wednesday this week we get the latest estimate for Q1 GDP for the Japanese economy. Speculation has been that the Bank of Japan may add further measures.
Finally the G7 ministers and central bankers meet this week to discuss currency tensions, limits of monetary policy and the need for more fiscal spending. Equities are likely to start Monday on a dull note after Friday’s weak close in the US.