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Markets weekly

12 April 2019

Week ahead

April is going to give investors a lot to think about. We believe that depressed Manufacturing PMI, relative to still resilient Services PMI, might have overstated the actual slowdown happening in the manufacturing sector.

In that regard, February’s industrial production numbers in France and in the UK released last week were significantly better than expected. This would suggest that trade tensions have weighed on sentiment  but not  necessarily had the same impact on  business so far.


US economy

Global economic health

The industrial production data for March in the US will be released on Tuesday. Expectations are for an increase of 0.3% month-on-month -an improvement from February’s flat number.

On Wednesday, it will be China’s turn to release its latest hard data. Industrial production, retail sales and fixed assets investment is likely to reflect the stimulus that was implemented at the beginning of the year.

It will also be interesting to see if the soft data starts to improve. Regional industrial surveys in the US are usually a good proxy for the ISM index coming out the following week. For this reason, the Empire Manufacturing survey on Monday and the Philadelphia Fed business survey on Thursday should not be overlooked.  

Chart of the week

This week marks the start of the earnings season for the first quarter of 2019 in the U.S. This period is usually a time for investors to disconnect from the political and macroeconomic noise and focus on what matters most over the long term: companies’ fundamentals.

In the context of an equity market that has rallied +15% this year and a yield curve that has inverted, there is a clear need for some good news. Unfortunately, this appears to be a big ask as, for the first time in three years, analysts expect companies in the S&P 500 index to experience a contraction in earnings. Yet, we believe that reality may be less dramatic than our chart of the week implies.

Chart of the week

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First quarter earnings season: Not as bad as it looks

Earnings season is always an interesting time for investors, but first quarter publications are likely to be of greater importance than usual this year.

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Consider the shape of the curve

In the last couple of months most of the headlines have focused on the shape of the US yield curve and whether it is a reliable recession indicator or not.

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