Market Activity

The Week Ahead

Markets this week

April 3, 2023

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Good morning and welcome to another week in the markets.

European markets will be looking for a better start to Q2 after March halted the early year rally. The FTSE was down 3% in March while the CAC and the DAX ended up fairly flat. All 3 had major dips during the month but mostly managed to recover over the last week or so.

Much of this was due to February inflation figures which dropped quite sharply and more than expected. If this continues, central banks jobs will become much easier as they can take their foot of the pedal and take more controlled measures moving forwards.

The open this morning has provided some positive news with the FTSE leading the way with a 0.72% gain at the time of writing. Generally we’ve seen positive news out of the UK recently which we hope will filter through to the market after the FTSE 100 has lagged behind its peers.

In the US, where the banking issues originated (again), markets were mostly defiant in March. Last month, they shrugged off crisis after crisis and mostly posted gains.

On Friday, the S&P rose 1.44%, the Dow increased 1.26% and the Nasdaq Composite jumped 1.74%. For March, the S&P was up 3.51%, the Dow 1.89% and the tech heavy Nasdaq 6.69%.

Contrary to popular belief, markets didn’t rally entirely without cause in March.

February’s core PCE in the US came in lower than markets had expected, a welcome relief after the month’s consumer price index, excluding food and energy prices, was higher than estimated.

That’s good news for those worried about inflation and higher inflation rates like technology stocks. Tech stocks benefit the most from lower interest rates, because their valuation tends to depend on future earnings, which are worth less when interest rates are high.

There are many on Wall Street painting a picture of up-and-coming gloom about a likely recession, but then part of last years drop in the markets was the pricing in of such a recession. As soon as rates started rising, a recession was on the cards, who would actually wait for it to hit before acting?

On a different note, tensions between Washington and Beijing are also spiking again, this time over the ongoing tour of the Americas by Taiwan’s president Tsai Ing-wen. It will reach a head on Wednesday when she meets US House Speaker Kevin McCarthy in California, which has been labelled “another provocation” by Beijing.

It is also set to be another week of industrial unrest in Europe. The strikes in Britain this week range from driving examiners to dockyard workers. The news is likely to be both depressingly familiar and tinged with hope of settlements.

On the one hand there will be more disruption and threats of further action. However, the government (or rather the chancellor Jeremy Hunt) has now found some money down the back of the Treasury sofa to help settle matters, at least in the public sector.

In France, the unions are overseeing further protests against President Emmanuel Macron’s pension reforms. This is likely to have much wider consequences for Europeans looking to get away by air for the upcoming Easter holiday weekend as French air traffic controllers join the walkouts — in addition to the disruption of ongoing strikes at Heathrow.

The markets have opened after the first calm weekend in about a month. The only major news was that of the surprise OPEC+ production cut. The organisation will cut around 1.16 million barrels, in response to declining prices. WTI and Brent surged in overnight trading, though both failed to hold early highs. Goldman Sachs raised its forecast for year-end to $95 for Brent, and other analysts argued that OPEC+ was attempting to put a floor under prices to stop further declines.

Overnight we saw mixed performances in Asia, with losses in Hong Kong countering gains for the ASX 200 and the Nikkei. If this production cut results in a sustained rise for energy prices then it will bring inflation to the fore again, after a week in which it seemed that price growth was beginning to ease.

Final PMIs around the globe are released today, with the US ISM manufacturing number out in the afternoon, though it seems oil will command the attention today.

Later in the week we will be watching closely at Friday’s nonfarm payrolls report for a fresh update on the health of a labour market which has remained robust over the past year in the face of a barrage of rate hikes by the Federal Reserve.

Economists are expecting the U.S. economy to have added 238,000 jobs in March after an increase of 311,000 in February. Average hourly earnings are forecast to have increased at an annual rate of 4.3%, which would be the slowest rate since July 2021.

The equity markets will actually be closed on Good Friday ahead of the Easter weekend so we will be spared the usual volatility created by the payroll figure until after the long weekend.

Ahead of Friday’s all important March jobs report the economic calendar includes reports on February job openings on Tuesday and March data on private sector hiring on Wednesday.

ISM purchasing managers surveys of manufacturing and service sector activity are due out on Monday and Wednesday, respectively.

Have a great start to the week in the markets and we’ll be back with a trading update on Wednesday.

Our market bias at the moment:

Many of our traders are now relatively flat/hedged. Some are buying the FTSE 100, whilst others have a SELL US markets position. The overall bias is low as we kickstart a new week.

After a large proportion of our strategies correctly called the initial market sell off, we witnessed an evolution across the board from SELL, to FLAT, to BUY, and now to BUY FTSE/SELL US.

After an excellent Q1, where it seemed many of our teams called most of the market movements right- it will be interesting to see if the momentum can continue.

Whether global markets bounce back this year, or trade in a range- our traders are tasked with achieving a minimum of 2 x their market benchmark per annum.

If you currently have an underperforming portfolio elsewhere, or are holding cash whilst waiting for an entry point- contact our team for a FREE market consultation.

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