US equity markets finished the week on a very positive note, boosted by jobs data that reported strong growth in the number of jobs created. However, wage growth came in weaker than expected. So, this data would reinforce the view that the that the US economy is in robust health, and at the same time inflationary pressures remain subdued. A possible further boost for equity markets late in may have been the announcement that Donald Trump is planning to meet the leaders of North Korea. This is likely to have less effect, one would assume, as markets hardly reacted during periods of tension, so are unlikely to be much improved by talks.
The week started on a fairly cautious note, mainly on continued fears of trade wars, and ended on a very positive one. The Vix index started at 21, just above the long-term average and finished the week at 15, well below it. Interestingly the AAII retail investor survey recorded a sharp drop in bullish sentiment, having been close to record highs a few weeks ago. Barron’s investor sentiment index is lower than it has been over the past few weeks. Ten-year US Treasury yields continue to hover close to 3% without getting there and the two years around the 2.25%.
As we mentioned, last week started on a downbeat note and equity markets rallied from a weak start. The FTSE 100 closed the week up almost 2%. This week is likely to be the inverse and equity prices are liable to start strong on Monday morning, we shall see if the enthusiasm continues as the week progresses.
This week will be dominated in the UK by the Chancellors spring statement. The usual topics are likely to be debated, business rates, housing, infrastructure spending. Phillip Hammond may try and paint a slightly brighter picture of the British economy. It possible his comments could move the pound and the bond market, however, unless one or other move materially then the impact on the equity market is likely to be muted.
This week's US data points are inflation on Tuesday, the core rate is expected to remain below 2%. Any deviation from that, particularly closer to the 2% mark could impact sentiment. On Wednesday we get the latest retail sales data for February and further inflation data in the form of producer prices. Then on Friday more consumer data in the form of the Michigan consumer survey along with industrial and manufacturing production.