This week
Sometimes things just click, don’t they? A multitude of factors can all come together all at once to drive the right outcome, the planets just align. For both investors and astrologers, not two groups often mentioned in the same sentence, this is exactly what seems to have happened during the previous week.
Tuesday put on something of a celestial showpiece for sky watchers, as Mercury, Venus, Mars, Jupiter, and Uranus all briefly appeared in perfect planetary alignment near a crescent moon after sunset. Dubbed the “Planetary Parade”, the phenomenon should last for two weeks and will be visible to those with a westerly view and clear skies.
The same can be said for investors, who enjoyed a stream of positive data during the week, signs of cooling inflation, upbeat results from retail giant H&M and fading concerns over the global banking sector all contributing to some stellar market performance. By Thursday, European markets had rocketed to their highest level in three weeks, primarily driven on by the property sector. With contagion appearing to be contained for now and hopes that the European Central Bank (ECB) may be near the end of its rate hiking cycle, the sector jumped 3.2% on Thursday alone, after a heavy drop in previous weeks had dragged it close to the 10-year lows hit last year.
Also helping the mood in Europe was the news that Spanish inflation was coming back down to earth quicker than expected. Hitting 3.3% for March, down from 6% the previous month, the reading is the lowest since August 2021. Core inflation however, which strips out volatile sectors such as fresh food and energy prices, was 7.5% year-on-year, slightly below the 7.6% recorded in February, showing there is still mucho trabajo for the ECB to do.
Over in the US, the mood was also relatively upbeat, as illustrated by Consumer Confidence data, released on Tuesday. Improving during March, despite concerns about bank failures and what it might mean for deposits. The data does go some way to support the narrative of the US consumer’s near-term spending strength, but the data also pointed to higher borrowing costs and reduced access to credit as growing headwinds, whilst falling house prices and the potential restart of student loan repayments are additional challenges.
The star piece of data this week came in the form of the US Personal Consumption Expenditure Price Index. Measuring only goods and services targeted towards and consumed by individuals. The data has also gained a reputation of being something of a favourite of the US Federal Reserve when judging the overall level of inflation within the economy. Showing a rise of 0.3% on a monthly basis, it seems inflation is still persistent within the US economy, leaving the door open for the Fed to raise rates further. However, expectations were for the reading to increase by 0.4%, something of a constellation prize if nothing else.
Next week
With the coming week starting off the first working week of April, following April Fool’s Day on Saturday, it won’t be just investors that will be kept on their toes.
Interestingly, many historians believe that the origin of the day could date back to 1580s Europe when most of the continent switched from the Julian calendar to its Gregorian equivalent. In the Julian calendar, the new year began on 1 April along with the Spring Equinox and anyone who was slow to receive the news or didn’t realise, was mocked as an ‘April Fool’ for still celebrating the new year when it was now 3 months earlier.
It is with this in mind that we start the new week (and the new year for some) on the continent, where a host of Manufacturing PMI data will be released for the Eurozone’s individual constituents as well as a composite reading for the bloc as a whole.
Expectations that job openings in the US should start to fall as the Federal Reserve continues to raise rates have made a fool out of many market commentators over the last year or so, as the labour market remains persistently robust. Wednesday will allow to us to further gauge if the Fed’s actions are starting have an effect as the Bureau for Labor Statistics releases its most recent monthly count of new work opportunities.
Staying in the US, the first Friday of the month, as ever, brings US Non-Farm Payroll data, released on Friday. A key piece of information when determining the US central bank’s next rate move. The employment data itself will be accompanied by Average Hourly Earnings, allowing us to gauge future inflation expectations as the more consumers earn, the more they tend to spend. It all combines to be a vital piece of data for the Fed and should take on added significance considering the extra impetus put on such data going forward from Jay Powell and co.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used, you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 31 March 2023.