UK Economic Update – 09 march 2015
A mixed performance from global equity markets last week as US payrolls growth accelerates, ECB QE commences and divergence remains the key theme
The FTSE 100 failed to make new headway last week as an early sell off meant that UK investors who were hoping for another period of strong gains were left disappointed.
This was in contrast to the performance of French and German markets, which rallied to new highs on the back of the ECB’s announcement on Thursday that it will begin creating new money to purchase bonds (QE) from today (Monday 09 March).
US markets also fell sharply during the week as concerns over whether or not valuations had become overextended preceded another set of remarkably strong non-farm payrolls and unemployment figures.
In detail – the February jobs number came in at 295,000, making a mockery of official forecasts (245,000), and bringing the three month rolling average to 288,000.
The US unemployment rate also fell during February, from 5.6% down to 5.5%, indicating that the labour market could be close to what the Fed has previously described as full employment (equilibrium).
In terms of UK economic data, both manufacturing and construction PMI’s topped expectations for the previous month. This was while the services PMI fell slightly, from 57.6 down to 56.7, although many would argue that this was to be expected given the sharp rebound that the index underwent in January.
This was while consumer inflation expectations in the UK were also shown to have fallen to a 13 year low, at 1.9%, although a considerable gap remains between actual inflation and expectations.
Looking ahead the focus for the week will be on the commencement of the ECB’s easing program, UK manufacturing production figures for February and US retail sales numbers. Chinese inflation (Tuesday) and industrial production (Wednesday) data could also have an impact upon markets.
On balance, we see scope for UK equity markets to remain close to the levels seen last week as the prospect of the ECB entering the bond market should offer further encouragement to investors, thus helping to offset concerns over the potential for rates to rise faster than previously expected in the US.
Chinese data due out this week may also be positive for UK equities as any further decline in inflation could add to the case for further policy action from the PBOC later this year.
FTSE 100 / 10 Minute Intervals
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