US equity markets swung back into positive territory yesterday as Energy names benefited from a crude oil price rebound, while investors keenly watched a ‘town hall’ address from President Donald Trump.
Accendo Markets Analyst, Mike van Dulken commented – “The Dow Jones was the rank outperformer, rising by 0.2% as Manufacturing and Energy names spearheaded the charge following Trump’s assertion that infrastructure spending could top $1 trillion, while the S&P500 and Nasdaq indices finished closer to flat, with the Energy sector leading the former.”
The services sector steps into focus this Wednesday, providing investors with another chance to assess the state of the UK economy.
Spreadex Analyst Connor Campbell noted – “This week hasn’t painted the most promising picture of the UK’s health at the end of the first quarter. Both the construction and, especially, manufacturing PMIs underperformed expectations, suggesting that, after showing resilience in the post-Brexit third and fourth quarters of 2016, UK growth may be slowing down. That heaps a lot of pressure on this morning’s services reading, pressure that is only heightened by how reliant the UK economy is on the sector. Analysts are forecasting a slight increase, from 53.3 to 53.5 month-on-month, though such estimates have been wrong twice this week.”
ADS Securities Analyst, Konstantinos Anthis added – “…if this disappoints, the pound is likely to come under pressure. Investors are not convinced by the BoEs bullish stance, so watch this space.”
So far the FTSE 100 is taking all this in its stride, jumping half a percent thanks to its commodity stocks and a lower start for the pound. Campbell added – “Sterling, which will likely bear the brunt of the post-services PMI market reaction, slipped by 0.1% against the dollar, taking cable below $1.245, while shedding 0.2% against the euro.”
In focus later today will be the Fed’s March Meeting Minutes and the release of Non-Manufacturing ISM data.
Anthis suggested – “The US currency has traded strongly over the past couple of days and whether this momentum holds up will be determined by today’s economic news and data; the release of the Non-Manufacturing ISM report along with the minutes from the last FOMC meeting are considered key drivers for the Dollar leading up to the Non-Farm Payrolls report on Friday. The two or three rate hike question continues with little clear direction so we believe the Fed will go back to its data driven approach when making a decision, which brings the health of the labour market back into play.”