The FTSE 100 managed to continue to climb higher in the past week despite the ongoing resilience of the Great British Pound. The FTSE 100 has been outperforming other major indexes for a change as it has been benefiting from the lack of exposure to the technology sector, combined with its heavy weighting in the commodity markets. Commodities, in particular oil have been positively impacted by the geopolitical tensions. The S&P 500 also managed a modest gain on the week despite slipping back on Friday. The Banks started the first quarter earnings season off on Friday. Despite a strong positive outlook statement from the Chairman which accompanied some strong earnings report JP Morgan’s stock fell almost 3% on the day. This may be early evidence that markets have largely priced in the expected strong earnings quarter.
Short and longer-dated US Treasury yields rose on the week, post the minutes of the last Federal Reserve meeting. However, the gap between the two years and the ten remains below 0.5%. The probability remains the Fed will increase rates three times this year, the minutes did suggest some members are in favour of four.
Investor bullish sentiment continues to drift lower judging by Barron’s composite investor sentiment index. The AAII retail investor survey shows another drop-in investor optimism for the coming months. It would appear the current geopolitical tensions has put a few bricks back into the investor wall of worry.
Capital markets were shut by the time the French, British and United States had attacked Syrian chemical weapons targets, it will be interesting what the reaction will be on Monday morning. Any knee-jerk reaction to events such as these is often temporary and can present a good opportunity to buy.
The week ahead will continue to be dominated by company earnings. On Monday Bank of America report, continuing the banks season. Other notable companies during the week will be, Goldman Sachs’s, Johnson and Johnson, Alcoa, American Express and Honeywell.
It’s a slightly quieter week for US economic news, we do get US retail sales for the month of March. Later in the week we also get industrial production and capacity utilisation for the previous month. It’s a busier week in the UK as we get average earnings for February alongside the latest unemployment figures. A jump in headline earnings will stoke the hawks, however, it will also help narrow the gap in real wages. On Wednesday we get more inflation data in the form of producer prices for March and the core inflation rate. Last month there was a surprise drop in the headline rate. On Thursday some consumer data in the form of March retail sales. Inflation is a theme this week as the euro area likewise releases its latest inflation rates. We also get the result of the latest German ZEW sentiment survey. Sentiment has been drifting lower over the past few months, one could anticipate a further drop this week.