The month and quarter ended not so much with a shower, but a few equity market squalls. The FTSE 100 lost about two thirds of one percent. The S&P 500 slightly less. Overall the last week of the first quarter managed to hold onto most of the gains made in the first quarter. Friday, was a day when it would appear investors took the opportunity to take advantage of some moves of the past few days to adjust positions, as the oil price gave back some of its recent gains, and the dollar slipped. Ten year US treasury yields seem stuck around 2.4%, despite the hawkish comments from the Fed speakers this week.
UK ten year gilt yields have been falling steadily over the past week to offer a yield of just 1.13%. With inflation in the UK expected to continue to climb in the coming months, and many FTSE 100 companies offering dividend yields more than 4%, this would suggest aversion to risk remains high. The Vix index closed the week above 12, still close to historic lows but higher than it has been trading recently.
On a week that Theresa May triggered article 50 sterling rose against the US dollar in the past five days, as well as the euro. There remains a lot of bearish sentiment to the pound. The odds of the pound hitting $1.3 before $1.2 would now probably have shortened.
Concerns that the Trump honeymoon period may be coming to an end also appeared to impact retail investor sentiment this week. The result of the weekly AAII investor survey reported that neutral and bullish sentiment fell compared to the previous week.
The week ahead will be dominated by the release of the Purchasing Managers Surveys for March. These are important as they indicate a contracting or expanding manufacturing and services sector, and give economists a window on the outlook for economic growth in the coming quarters. The past month’s results did show a slight softening in the reading for global PMI, however readings for major developed economies remain well above the critical 50.
Aside from the PMI reports this week it is a busy week for data as to the strength of the UK economy, as the Brexit discussions start in earnest. On Tuesday, we get the minutes from the last Bank of England Financial Policy Committee. On Friday, we get the Halifax House Price Index change for March. The latest Balance of Trade, Industrial and Manufacturing production for February, as well as a speech from Mark Carney.
As far as the US economy goes Friday is also the big day as we get a raft of employment data. We also get average earnings for March, a data point for the outlook for US inflation, and possibly when the Fed are likely to move again.