A downbeat end to the week

Nvidia’s share price fell about 5% on Friday; possibly, we may have seen the first crack in the tech investor world, as according to the latest Merrill Lynch fund manager survey, money continues to flow into equities at a pretty robust rate. Jerome Powell’s testimony encouraged the 2-year bond price to rally, as investors were encouraged to believe we may be nearer than farther to the first US interest rate cut. The latest jobs data on Friday saw downward revisions in both December and January reports, hirings are falling and firings are on the rise, further signs the US economy is starting to show some signs of slowing down.

We have noted that the UK economy may have recently shown signs of recovery, which may have been reflected in sterling, which is currently close to 1.3 against the dollar; our currency is also showing signs of life against the euro.  In Sunday’s Telegraph, Liam Halligan wrote an interesting reflection on Jeremy Hunt’s budget, noting how closely Chancellors now tie their changes in fiscal policy to what the OBR believed was the path of the UK economy. We are, of course, reminded by the reaction to Liz Truss and Kwasi Kwarteng’s budget, who presented their case for tax cuts, making the apparent grave error of not consulting the OBR beforehand, and bond markets threw their toys out. Ms Truss threw Mr Kwarteng under the proverbial bus, with the Conservative party following closely behind in doing the same to her. Most of the country was quickly told to blame any mortgage increase on Ms Truss. Despite two days before her budget, the Bank of England were dumping gilts as part of QE, and the pension sector had been leveraged up the yin yang by the ill-fated LDI; any bond sale was likely to be exaggerated. If everything goes wrong, you will always have someone else to blame.

This week, we have the monthly CPI report; US headline inflation is expected to remain at 3.1%. Other economic data points include retail sales, industrial production, and the preliminary reading of Michigan consumer sentiment for March. We will get some further indications of whether these green shoots might likely bud in Spring, as further signs of recovery are expected in the monthly UK GDP figures. Average earnings and the employment rate will also be noteworthy to further indicate when the Bank of England may cut rates. In China, the focus will be on the People’s Bank of China’s one-year medium-term lending facility rate announcement amid increasing anticipation of a possible rate cut.  Stocks in Europe start the week slightly downbeat note.