26/05/2015- Last week’s markets and economic data expected in the week ahead
Economic data released last week was broadly positive. Key items included inflation figures in both the UK and the US. In the UK, inflation (as measured by the CPI) fell to -0.1% in April from zero in March, giving the lowest reading since March 1960, due in part to a fall in air and sea travel fares. In the US, inflation fell to -0.2% in April from -0.1% in March, with energy prices (down 1.3% year-on-year in April) still the main factor. Much has been made of ‘good deflation’, as opposed to ‘bad deflation’, combined with expectations that inflation will rise towards the end of this year, as the base effects of the fall in the oil price last year fall out of year-on-year figures.
Positive economic data came in the form of UK retail sales, as volumes rose by 4.7% year-on-year in April; UK public sector borrowing, recording the lowest April figure since 2008; US housing starts, which rose by 20% month-on-month in April to the highest annualised rate for 7 years; and Japanese first quarter GDP growth, which came in at 0.6% quarter-on-quarter, ahead of expectations of 0.4%. The clearest negative was a fall in a key German economic sentiment survey in May.
Stock markets posted a strong week of performance. The FTSE 100 index rose by 1.0% over the course of the week; the S&P 500 index rose by 0.2%; the Dax index rose by 3.2%; whilst the Nikkei index rose by 2.7%. In sovereign bond markets, the UK 10-year Gilt yield is currently at 1.99%, the US 10-year Treasury yield is at 2.15% and the German 10-year Bund yield is at 0.55%.
Economic data due for release this week is shown below. In a fairly light week which started with public holidays in the UK and the US, the second estimates of first quarter GDP growth in both countries are likely to be the highlights.
US – Durable goods orders
US – Consumer confidence
UK – Q1 GDP growth (2nd est.)
Japan – Retail sales
US – Q1 GDP growth (2nd est.)
Japan – Inflation
Japan – Unemployment
Japan – Industrial production