Markets Weekly

31 May 2019

Week ahead

We leave behind an eventful May, but June is expected to bring plenty more news for markets.

Next week, investors will be closely watching activity data from the eurozone, where economic confidence has been improving on the back of strong consumption and more stable business activity. The Markit purchasing managers’ index (PMI) and retail sales for May will question the sustainability of this positive trend. Data on first-quarter unemployment and May’s inflation readings will gauge signals from the region’s labour market, which should remain tight despite some recent softening. Investors shouldn’t fear any surprises from next week’s European Central Bank policy meeting, as interest rates are poised to remain unchanged.

In Asia, the focus is on China PMIs, which are likely to have taken a hit from recent trade news, albeit offset by local policy stimulus. In the US, markets await a particularly busy week amid the release of May’s PMIs and retail sales, as well as April’s construction spending and factory orders. Investors will be eager to see the extent to which business activity has been hit by trade wars rhetoric. We also look forward to May’s non-farm payrolls, unemployment rate and average earnings growth, with the job’s market expected to remain strong and income growth to advance further.

Chart of the week

US consumer confidence supports growth outlook

The US consumer is not only the driving force behind the domestic economy but, arguably, the global economy too. Therefore, indicators assessing consumers’ health are closely monitored by market participants.

The Conference Board US Consumer Confidence Index increased to 134.1 in May. The Present Situation Index, which is based on consumers’ assessment of current business and labour market conditions, increased from 169 to 175, near to 18-year highs.

Despite the negative spectre of trade wars, consumers’ optimism continues to benefit from declining unemployment, wage increases, low interest rates and tax cuts.

The US unemployment rate of 3.6% is the lowest in 49 years and compares to above 10% in October 2009. We expect labour market improvement to persist over the next 18 months with the unemployment rate declining to 3.2% by the end of 2020.

Pay growth of 3.2% year on year is less than expected at this point of the economic cycle, but continues to run comfortably ahead of the rate of inflation.

Low interest rates make it cheaper for consumers to service debts such as mortgages and tax cuts have boosted disposable income.

We believe household consumption will continue to support growth for some time and therefore maintain our 2.8% growth forecast for the US economy for 2019.


Chart of the week

Previous editions of Markets Weekly

Investments can fall as well as rise in value. Your capital or the income generated from your investment may be at risk.

This document has been issued by the Investments division at Barclays Private Banking and Overseas Services (“PBOS”) division and is not a product of the Barclays Research department. Any views expressed may differ from those of Barclays Research. All opinions and estimates included in this document constitute our judgment as of the date of the document and may be subject to change without notice. No representation is made as to the accuracy of the assumptions made within, or completeness of, any modeling, scenario analysis or back-testing.

Barclays is not responsible for information stated to be obtained or derived from third party sources or statistical services, and we do not guarantee the information’s accuracy which may be incomplete or condensed.

This document has been prepared for information purposes only and does not constitute a prospectus, an offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any evaluation of the securities or any other instrument, which may be discussed in it.

Any offer or entry into any transaction requires Barclays’ subsequent formal agreement which will be subject to internal approvals and execution of binding transaction documents. Any past or simulated past performance including back-testing, modeling or scenario analysis contained herein does not predict and is no indication as to future performance. The value of any investment may also fluctuate as a result of market changes.

Neither Barclays, its affiliates nor any of its directors, officers, employees, representatives or agents, accepts any liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this communication or its contents or reliance on the information contained herein, except to the extent this would be prohibited by law or regulation..

This document and the information contained herein may only be distributed and published in jurisdictions in which such distribution and publication is permitted.  You may not distribute this document, in whole or part, without our prior, express written permission. Law or regulation in certain countries may restrict the manner of distribution of this document and persons who come into possession of this document are required to inform themselves of and observe such restrictions.

The contents herein do not constitute investment, legal, tax, accounting or other advice. You should consider your own financial situation, objectives and needs, and conduct your own independent investigation and assessment of the contents of this document, including obtaining investment, legal, tax, accounting and such other advice as you consider necessary or appropriate, before making any investment or other decision.