Never a dull moment

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The FTSE 100 hit a record high, driven by weaker sterling and a strength in resources. Of the approximately 4% rise in the FTSE 100 this year, almost half has come from BP and Shell. It has taken over a year to regain its previous high, but I guess in the face of interest rates remaining above 5%, that’s not so bad. However, one must be realistic and point out that in dollar terms, the index is well below its previous highs, and it continues to lag most developed markets. This is better demonstrated in the performance of FTSE 250, which is much more geared to the fortunes of the UK economy, which is still more than 10% below its previous high and is largely unchanged in the past five years.

Yesterday, there was some good news for the UK economy, as the Flash Purchasing Manager Survey continues to indicate an improving economy. The composite PMI, combining services and manufacturing, came in at 54 from 52.8 in the previous month, apparently driven by an improvement in business and consumer spending. According to Pantheon Research, that news would suggest quarter-on-quarter economic growth of around 0.4%.

In contrast, the US PMI came in weaker than expected, coming in just over 50, further indicating that the US economy may be slowing more than anticipated in the second quarter. There were further signs of a weakening employment market. Later today, we will get the durable goods orders for March and the Q1 GDP estimate tomorrow. Also, on Thursday, initial jobless claims will give another insight into the jobs market, and then on Friday, the latest Michigan consumer confidence survey, so plenty of news to get a sense of the direction of the US economy. So far, US equities, after 3 fairly miserable weeks, are staging something of a rally; US interest rates have not changed much, and the 2-year yield remains just under 5%.  The question I guess, will now be does indications of a weaker economy help stocks as it improves the case for the Fed to cut in June or unnerve investors as they worry the Fed will be behind the curve on the way down as they were on the way up, The worst of all worlds sticky prices and a slowing economy, the dreaded stagflation. Central Bankers Kryptonite.

Earnings season is well on its way, and the tech names have done okay so far. Tesla even bounced last night after a 40% fall in the share price this year. Even though the company missed expectations, the shares probably took part in something of a relief rally, as this has been largely anticipated. Over the coming days, we get more heavyweights, including Microsoft, Alphabet and, on another note, Boeing, to report before the US market opens today. Never a dull moment in the world of capital markets.

On another note, Back to Black, the Amy Winehouse biopic movie is worth a visit to the picture house. It’s not an easy watch, though. The lead actress is great; you think it’s her at times, and I am not sure Blake is what Walt Disney had in mind as a prince.