As it is the end of the month, as well as the quarter, it is perhaps worth reflecting on the fact that it’s been a fairly decent period for equity markets, despite the lockdowns across Europe and in the UK.
Having said that, there has been mixed progress on the vaccine rollout, with the UK excelling and the rest of Europe appearing to do their level best to mess it up.
“Despite the divergent progress being made between Europe and the UK, it is European markets that have performed the better, though that could well change if Europe doesn’t get its act together in Q2,” Michael Hewson, chief market analyst at CMC Markets UK, said this morning.
Yesterday’s markets in Europe saw records broken with the DAX closing at a record high, while the FTSE100 lagged behind and US markets that sank back, posting modest losses, although the Russell 2000 managed to claw back half of its losses from Monday.
The US 10-year yield continued to rise for all the right reasons, hitting a 14-month high, as economic data continued to look solid, Hewson pointed out.
“This weak finish is likely to see European markets open slightly lower this morning, after a weaker Asia session, as we get set to run the rule over more economic data, some dated, in the case of the UK, while the latest Chinese PMI’s showed the Chinese economy was expanding quite nicely, particularly in services, which showed a big jump to 56.3,” he continued.
Employment numbers from the US
The US ADP employment report, due out later could also offer up further evidence of a booming US economy if the numbers in any way reflect the huge surge, we saw in US consumer confidence in March.
“This afternoon’s numbers could well be an important leading indicator on Friday’s upcoming non-farm payrolls report, where we’ve seen a number of forecasters suggest we might see up to 900k new jobs added,” Hewson said.
“While this may be on the optimistic side of forecasts any sort of bumper number will test the Fed’s narrative that a booming jobs market isn’t an inflation risk.”
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In February 117k new jobs were added to the ADP numbers, the second consecutive month of gains, and a slightly more modest number than the NFP February report a couple of days later.
This might suggest the potential for an upward revision to the February numbers, while today’s March numbers are forecast to see another 550k jobs added to the headline number, he noted.
“Before that we’ll be getting confirmation of the latest revisions for UK Q4 GDP which is expected to confirm the economy grew by 1 per cent the last quarter of 2020, thus avoiding the prospect of a double dip recession.”
“When these numbers initially came out all of the headlines focussed on the fact that the UK economy saw its worst annual contraction since 1709 at -9.9 per cent,” he stressed.
“While this is obviously an awful number it also suggests we’ll see a strong bounce back if and when it comes.”