The FTSE 100 finished the week close to its 52 week high, boosted by the actions of the Bank of England. The S&P 500 continued its rise to close the week through another all-time high. The US earnings season is closing in on the final stretch with 86% of companies in the S&P 5oo having reported. According to Factset year on year earnings have fallen by 3.5% in the second quarter, better than analysts forecast, however it is the 5th sequential quarter of negative corporate earnings growth.
The start of the month sees the release of the previous months Purchasing Managers Surveys, without going into detail for every region, according to JP Morgan and Markit Research the start of the third quarter saw the rate of expansion of the global private sector accelerate to a three-month peak. Commenting on the results of the latest survey JP Morgan’s Director of Global Economic Co-ordination “The July PMI surveys indicate a slight improvement in the pace of global economic expansion, driven by a strong acceleration in factory output, however the service sector continued to disappoint”.
This pattern of ultra-low interest rates, modest economic growth, which has driven equity markets without any real earnings growth at present seems set to continue, for how long is anyone’s guess.
Looking to the week ahead, for the UK we get Industrial and Manufacturing for June released on Tuesday. Forecasts are for a small pickup from the month of May. Analysts will probably look through this data, after the actions of the Bank last week.
It’s a busier week in China as we get the latest import export data for the month of July, and then on Tuesday the latest inflation data. On Wednesday outstanding loan growth and new loans for the month of July.
Every week appears a busy week for US data and despite the summer holidays, this coming week is no exception. The focus will be more on the state of the consumer as we get import export prices on Thursday. On Friday we get retail sales for July and the preliminary forecast of Michigan consumer sentiment for August.
The focus in Europe will be on Germany towards the end of the week as we get a flash estimate for 2nd quarter GDP growth, and the inflation rate for July.
August has been known to be a tricky month for equity markets in the past, so far this month has started on a solid footing. There is bound to be a speed bump in the road ahead at some point.