Global equity markets recovered some of the previous week’s decline with investors prepared to look beyond some mixed economic data releases from both the US and Europe. In the US, durable goods orders which tends to be viewed as a proxy for business investment, sunk sharply last month [1] whilst PMI data from the Institute for Supply Management showed a further slowdown in the manufacturing sector, albeit at a slightly slower rate than back in January [2]. However, pending home sales posted their largest gain since June 2020 [3] in what could be a sign that housing activity has finally bottomed out after a challenging 12 months. Meanwhile in Europe, inflationary pressures remained elevated with February’s modest drop in headline CPI to 8.5% from 8.6%, not as much as anticipated by economists [4].
Despite all of the noise on the macro front, the major equity indices all delivered a positive week with the NASDAQ in the US the pick of the bunch at +2.6% with the S&P500 enjoying a strong gain of +1.9% with energy and materials businesses particularly strong. On the Continent, the MSCI Europe ex UK index rose by +1.7% thanks to a strong showing by German and French names whilst in the UK, the FTSE100 and FTSE250 rose by +0.9% and +1.2% respectively. That was despite a further rise in the gilt curve with the 10-year yield concluding the week 20 basis points higher at 3.86% on positive economic data. The equivalent duration US treasury yield was largely unchanged at 3.96%. Elsewhere, the Nikkei 225 in Japan added +1.7% and the Shanghai Composite rose by +1.9% on signs that the Chinese recovery post the relaxation of its strict COVID measures was gaining momentum.
Moving to commodities, oil prices benefitted from that same Chinese optimism with Brent crude concluding the week at $86 a barrel, a gain of +3.3%. Copper was another beneficiary of China demand hopes, the metal rising by +3.1% to $8,955 a tonne. As for gold, the precious metal recorded a weekly gain of +2.0%, taking it to $1,846 an ounce on the back of modest weakness in the US Dollar. [5]
Week Ahead
Friday’s jobs report is the key data release to monitor in the US this week. The economy is expected to have added more than 200,000 jobs last month whilst unemployment is forecast to remain unchanged at 3.4%. Meanwhile on Tuesday and Wednesday, Federal Reserve Chair Jerome Powell is testifying in front of the both the House of Representatives and the Senate in Washington with his every word likely to be closely scrutinised for any indication regarding the future path of interest rates. Across the Atlantic, monthly GDP data is the standout figure due from the UK this week with the economy expected to have a recorded a modest +0.1% expansion during February. Other domestic figures to keep an eye on include retail sales from the British Retail Consortium (BRC) and industrial production. Moving to the Eurozone, revised Q4’22 GDP numbers are published on Wednesday with retail sales data also worth keeping an eye on. In Asia, Chinese inflation is expected to have pulled back last month (released Thursday) whilst in Japan, the Bank of Japan hosts its monthly policy meeting on Friday morning. [6]
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[1] United States Census Bureau, 06/03/21
[2] Institute for Supply Management, 06/03/21
[3] National Association of Realtors, 06/03/21
[4] Eurostat, 06/03/21
[5] Refinitiv, 06/03/21
[6] Forex Factory, 06/03/21
SJP Approved 06/03/23