Stock markets put in a good showing in the shortened week just gone. Better than expected (off a very low bar!) corporate earnings results in the US combined with lower-than-expected inflation to drive markets higher. This week is action packed, with inflation data for the UK out on Wednesday as well as some big US companies reporting their Q1 earnings’ numbers.
Last week
- Stock markets rose strongly, with Continental European shares leading the way
- Banks bounced back, following some strong results from JP Morgan last Friday. This helped the banking sector at large and helped drive returns in the UK stock market
- US inflation (as measured by CPI) came in less than expected
- Bond markets gave up ground last week
This week
- This week sees the release of Chinese growth data (GDP) which is due out tomorrow
- Wednesday sees the release of UK inflation data. Expectations (according to Bloomberg survey data) are for it to drop to 9.8% from 10.4%
- Corporate earnings season from the US is also very much in focus this week, with 59 of the companies within the US S&P 500 reporting results, including Goldman Sachs, Bank of America, Tesla, Netflix, and IBM
Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.
Last week in more detail
- Stocks made the most of the shortened week, posting some good gains across the board. Continental European markets rose by 2.8%, with Japanese markets closely behind, rising by 2.4% on the week. This, combined with some decent performance from the US market (up by 1.3%) saw the global index of stocks (as measured by the FTSE World) rise by 1.5% on the week which takes gains for the year to 6.5%.
- The UK FTSE All Share put in a decent showing last week, rising by 1.9%. This builds on a strong recent run of performance which has seen it bounce by just over 3% in April. Within the UK market, the bounce back has been driven by the larger companies in the FTSE 100; specifically, the Oil and Gas sector, the Health Care sector, and the Banking sector (all up over 6% in April).
- The 1st Quarter’s corporate reporting cycle kicked off last week in the US and the numbers were very good and (importantly!) better than had been expected. It is very early days still (only 6% of companies have reported thus far), but the Banks that have reported have generally beaten estimates. Friday saw JP Morgan, Citigroup and Wells Fargo all beat estimates, with JP Morgan (+8%) and Citigroup (+5%) rising strongly on Friday as the results came out. JP Morgan CFO Jeremy Barnum noted “significant new account opening activity” as a positive driver; benefiting from an influx of deposits following the recent bank runs at Silicon Valley Bank and Signature Bank.
- US inflation data came in at 5% last week (as measured by CPI). This was a tad lower than had been expected (Bloomberg analysts had pencilled in a 5.1% reading) and was markedly lower than the prior reading of 6%. It represented the slowest pace since May 2021. This lower-than-expected inflation number was also complemented last week by lower-than-expected numbers for US Retail Sales; indicating that the rate hikes are working and doing their job of cooling the economy and taming inflation.
- Government bond markets gave up ground last week, whilst credit rallied. UK Gilts fell by 2% over the week, whilst US Treasuries fell by 0.6%. These falls came as yields rose, with the UK 10-year bond yield closing out the week at 3.67%. Credit spreads tightened over the week (as confidence improved), and this benefited the shorter-dated parts of the market more than the longer-dated areas (which were hit by the rise in government bond yields). This saw UK credit markets down by 0.8% on the week (hit by rising bond yields) and global high yield markets up by 0.6% on the week.
US inflation (CPI) came in at 5% last week which was a touch lower than expected
Source: Bloomberg
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