Economic data released last week was largely negative. The first estimate of first quarter GDP growth in the US came in at an annualised rate of 0.2%, well below expectations of 1.0% and down from 2.2% growth in the fourth quarter of last year. The growth rate was affected by severe winter weather on the east coast, port strikes on the west coast and a strong US dollar. As for the UK, the first estimate of first quarter GDP growth came in at 0.3% quarter-on-quarter, below expectations of 0.5% and down from 0.6% growth in the fourth quarter of last year. A slowdown in business and financial services drove growth in the overall services sector lower. Meanwhile, a key purchasing managers’ index for the UK manufacturing sector suffered an unexpected setback in April, perhaps influenced by the forthcoming general election this week.

On the positive side, the Eurozone climbed out of deflation territory in April as inflation rose to zero, continuing a rebound from a recent low-point of -0.6% in January. Japanese inflation showed a welcome up-tick, as core inflation (excluding food) rose to 2.2% in March, although the Bank of Japan pushed back its timetable for hitting its 2% inflation (full) target towards the end of 2016.

Stock markets retreated a little last week. The FTSE 100 index fell by 1.2% over the course of the week; the S&P 500 index fell by 0.4%; the Dax index fell by 3.0%; whilst the Nikkei index fell by 2.4%. In sovereign bond markets, yields rose last week as disappointing GDP growth data (as above) pushed out expectations of interest rate rises. The UK 10-year Gilt yield is currently at 1.96%, the US 10-year Treasury yield is at 2.12% and the German 10-year Bund yield is at 0.38%.

Economic data due for release this week is focused on purchasing managers’ indices for the services sector, alongside employment data from the US.

Tuesday:

UK – Construction PMI

US – ISM Non-Manufacturing index

Wednesday:

UK – Services PMI

Eurozone – Services PMI

Eurozone – Retail sales

Thursday:

None

Friday:

UK – Trade balance

Germany – Industrial production

US – Non-farm payrolls

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