Don’t let the sun go down on me

JP Morgan stock rose almost 10% on Friday as several of the country’s biggest banks reported better-than-expected earnings, getting the season off to a positive start. These numbers help support the view that the events of last month had a limited impact on the profits of the largest institutions. One note of caution all three banks increased their loan provisions for potential bad debts as a consequence of the uncertain economic outlook. On the economic front, there was some mixed news; China’s exports year over year surprisingly beat forecasts; however, imports fell below expectations, widening the trade deficit between China and America. US retail sales fell month on month more than forecast, and new jobless claims figures revealed that the number of people filing for unemployment benefits rose more than expected.

Despite a modest decline on Friday, developed markets had another decent week, continuing the positive mood of the past few weeks. The S&P 500 getting ever closer to 4200, the level it has failed to break for almost a year now. The FTSE 100 is almost back to its peak of earlier in the year, as is the Stoxx 50. Will there be enough positives in the coming weeks to help push these indexes through the barriers of earlier in the year? Yields on US treasuries rose across the curve over the week as the dollar continued its downward trend, if only modestly. The Vix fear index reached its lowest level on Friday for over a year.

Earnings will be the focus again this week as many big blue chip companies will report their numbers and as Europe starts to join in with the likes of SAP, Nestle and Rio. Over the pond, Procter and Gamble, Bank of America, Johnson and Johnson, Philip Morris, Netflix and Lockheed Martin, to mention but a few.

It’s a slightly busier week on the economic data front, including a selection of reports from China, the world’s second-largest economy, retail sales estimates for GDP and Industrial Production most noteworthy. On Tuesday, we get employment data for the UK economy and average earnings growth. The unemployment rate is expected to climb from 3.7% to 3.8%, and the rate at which earnings are growing year on year is expected to fall modestly. Following on from that on Wednesday, there is a raft of UK inflation data. The consensus is for UK inflation to drop back into single digits year over year and for the core rate to drop to 6%. We get a similar report from Europe, where again, inflation rates are expected to fall further; however, economists do not believe the fall will be enough to deter the ECB from hiking further in the coming months. We may learn more as ECB Chair Lagarde is speaking today at the IMF/World Bank spring meeting in Washington. To cap off a busy week, we get the flash PMIs for April around the globe. Stocks in Europe are expected to open flat from Friday’s close this morning.