Developed equity markets paused for breath in the first week of the second quarter. Once again remaining resilient despite a mid-week sharp reversal in fortune from the S&P 500, post the release of the March Federal Reserve minutes, and any geopolitical concerns coming mainly from the east. In the past week, we had the release of the monthly Purchasing Manager surveys from around the globe. After a slight dip from January to February the JP Morgan Composite Purchasing Managers Index rose in the month of March to 53.8 from 53.5 the previous month.
Geopolitical events may have had little impact on equity markets in the past week, but it did have a predictable impact on the price of gold which shot up to $1267 an ounce. Other assets that tend to attract capital looking for a haven at times of geopolitical tension are the Japanese yen, oil and US treasuries. Oil rallied and has now recovered back to £52 a barrel from a low of $48 a few weeks ago. The yen and US treasury prices both rose however did give back some gains at the end of the week. The Vix, or fear and greed index, closed the week still above recent lows, however only marginally higher than where it started the week. Equity markets week were also helped in the past few days after the hawkish minutes, by a much more dovish speech from Mario Draghi at the ECB Watchers Conference in Frankfurt.
Now to the week ahead, and attention will turn away from the PMI surveys and to company earnings, as the first quarter earnings season starts this week. First to report will be the US banks, JP Morgan Wells Fargo and Citigroup on Thursday. However, the focus, at least at the start of the week for the UK will be the latest inflation data. On Tuesday, we get the estimates for March inflation rate. Year on year inflation rate is expected to drop a fraction from the 2.3pct in February to 2.2pct in March. This will be followed on Wednesday by the release of the latest unemployment rate along with hourly earnings.
Aside from company earnings there are as always, a few macro events during most calendar weeks for the US economy to focus on. On Thursday April’s preliminary Michigan Consumer confidence report is released, and on Friday retail sales and inflation data. Rather as inflation has been creeping higher in the UK dampening consumer sentiment and retails sales data, it has been a similar picture for the US economy. After the hawkish comments of the past few days, and last week’s weak jobs report another dip in consumer confidence may bring the expected June rate hike into question.