Looks like a fun week ahead

Stock markets around the globe finished the week on a downbeat note. On Friday, the S&P 500 gave back just over 1%, the FTSE 100 almost 2%, and the Euro Stoxx 50 did the same. There was no hiding place as bonds across the globe fell amid increasing concerns after last week’s US report, which stated that US inflation was now at 3.8% year over year in April, and was becoming a more pressing issue. Last week’s meeting between Trump and Xi failed to yield any progress toward ending the war or opening the strait. Oil prices rose again above $100 a barrel, but remain below recent highs. The Vix fear gauge rose modestly, remaining below 20.

The pound, which had held up pretty well in the face of the ever-increasing likelihood that Mr Starmer was facing multiple threats to his premiership, fell against both the dollar and the euro as Mr Burnham threw his hat into the pot to challenge Mr Starmer, despite not being an MP. The 2-year US Treasury yield has risen back to 4% amid concerns that Mr Warsh’s first job as the new Fed chair could be to announce a rise in US interest rates, not cut them, in the coming months. Incurring the wrath of Mr Trump. We did make the point last week that higher bond yields would ultimately have a knock-on effect on equity markets, and that proved to be the case.

What to look forward to this week: the release of the Flash PMI surveys for the US, Eurozone, Japan, UK, India, and Australia will provide the latest indications of global growth and inflation trends. Global demand is, to some degree, being held up at present by stockpiling, possibly flattering the economic picture. On Wednesday, we get the monthly UK inflation report, which, at the headline level, may provide some relief for the Chancellor, as we forecast a dip from last month’s 3.3% to 3% this month, helped by favourable base effects. This may be temporary, as forecasts indicate inflation will rise to 4% later in the year. We also get Producer prices, which are expected to jump this month. Ahead of that, on Tuesday, we get the monthly UK employment numbers, and the unemployment rate is forecast to remain just under 5%. The Bank of England are in a tricky position. Likewise, the ECB as an economist forecast euro area inflation to climb to 3% year over year, based on the data released this week. 

On Friday, we get the UK’s monthly retail sales data, and in the US, the latest results of the Michigan Consumer Sentiment Survey, and inflation expectations. Looks like a fun week ahead. Equity markets start the week on a downbeat note.

Quick reminder: tube strikes on Tuesday and Thursday. You can get in, but not home. Very sneaky, all about wanting to work 4 days a week for the same money as I understand it. I know!