The equity-winning streak was broken last week as the developed markets of Europe, the US and UK all fell in the past five days. Asian markets in contrast performed a little better, the yen weakened encouraging the Nikkei higher, and likewise a weaker Renimbi had a similar positive impact on the Shanghai Composite. The FTSE 100’s performance was impacted at the end of the week by a disappointing update from Next, considered one of the market’s darlings and thought to be a window on the strength of the consumer.
It was a busy week for US macro data as members of the Federal Reserve once again floated the idea of moving to raise rates at the April meeting. Overall numbers appeared to come close to expectations with a few exceptions. Existing home sales fell 7% month on month in February, as did new home sales against expectations of a 3% rise. After the recent recovery in the oil price a larger than expected build in crude stocks saw the price dip. Durable goods orders fell in February but no more than expected. The Markit flash Purchasing Managers surveys for March came in higher than the previous estimates. Finally, on Friday the final estimate for Q4 US GDP came in at 1.4% against a consensus expectation of 1%.
Sentiment appears to remain pretty cautious, however the Vix did close the week below 15 which is once again either showing complacency or confidence in the current outlook for equity prices. According to Lipper fund flow data all equity funds saw net outflows of just over $1.5bn in the past week. The Dow Jones Transport index, which has shown a strong recovery in the past few weeks, also gave back some ground in the past 5 days. US treasury yields showed little reaction to the slightly less dovish comments from St Louis President and Federal Reserve member Jamie Bullard.
Another eventful quarter is rapidly coming to a conclusion. With a few days to go global equities are having a better quarter than looked like it would be the case in mid-February. However, the FTSE 100 is likely to finish the quarter lower than it started, the S&P is currently close to where it started the year. Europe, where sentiment seemed the most optimistic at the start of the year, is currently down around 10% from the start of the year.
Looking to the final week of the quarter, we get more speeches from Fed members, in particular the Chair Janet Yellen on Tuesday. At times the Federal Reserve offer mixed messages with their desire to offer " Forward Guidance". Janet Yellen's comments did appear to be more cautious than Mr Bullard in suggesting the possibility of a move in April.
As for the UK Thursday will probably be the focus, with the release of the final estimate for Q4 GDP, expectations are for the economy to have grown by 1.9% year on year. We also get the latest business investment data and more consumer data with mortgage approvals and consumer credit, which has shown quite recovery in the past months.
Friday is the first day of the second quarter and for that reason we receive the March final Markit Purchasing Managers Index readings for all the major regions.