Mark My Word

Good Morning.

Throughout last week, markets advanced overall but registered somewhat mixed reactions to different economic data releases. In the midst of a very busy week in terms of data releases and economic events, equity markets moved higher in Europe and the US but declined in Asia, whilst the yield on the US Treasury declined to almost 2.6% and gold rose sharply. The main drivers of these swings appear to have been mixed data prints and a flurry of geopolitical concerns.

On the one hand, we have had markets digesting some data disappointments in the Euro area and the US, coupled with an escalation of tensions in Ukraine. In the Euro area, flash inflation rebounded less than expected, and US, consumer confidence, construction spending, and auto sales disappointed. However, the worst news came from an almost stagnant Q114 GDP print. From a markets perspective, credit markets appear to be complacent whilst the emergency UN meeting weighed negatively on equity market sentiment towards the end of the week.

There were positives to take out of last week’s news, most notably improvements in Germany’s labor market and UK’s consumer confidence, the stabilization of credit conditions reflected in the ECB’s bank lending survey, and a final Euro area manufacturing PMI releases surprising to the upside. In the US, the strong Chicago PMI was followed by a surprising decline in the unemployment rate to 6.3% and a very strong print for nonfarm payrolls at 288k

Yesterday’s focus was primarily on US ISM Nonmanufacturing as services industries data showed that this segment of the economy expanded the most in 8 months, sending equities higher and US treasuries subsequently lower. In the Eurozone, the market eagerly awaits services and composite PMIs, the ECB’s Monetary Policy and Congressional testimony by Fed’s Yellen.

Within the Emerging Markets space, attention will focus on Chinese data as well as various Monetary Policy meetings in countries such as the Czech Republic, Indonesia, Malaysia, Peru, Philippines, Poland and Romania. There are no pre-announced events to anchor market attention around the situation in Ukraine next week, but headlines are likely to reflect continued tensions, however US President Obama and German Chancellor Merkel referred to May 25, the date of the elections in Ukraine, as the next potential trigger of a broader set of sanctions against Russia.

Have a nice day!

Mark