- 2017 ends with record share indices
- 2018 starts in muted tone
- EU, US and UK manufacturing data dominates today
By David Johnson
A very Happy New Year to you. As John Lennon put it, “let’s hope it’s a good one, without any tears.”
Markets end 2017 on a high
In spite of wave after wave of doom and gloom, equities markets were certainly not producing tears. The FTSE ended 2017 on a record high and we saw similar performances in other share markets around the world. That may have a lot to do with the tens of trillions of Dollars central banks have pumped into the financial markets over the last decade, but the fundamentals of global economic growth are very visible. Those signs include improving unemployment levels, growing Gross Domestic Product (GDP), increased trade and, to a lesser extent, increased investment.
But rather than trying to cover the whole year, let’s look at Week One of 2018.
Manufacturing results released this week
We ease into the week with Manufacturing Purchasing Managers’ Indices (PMI) from the Eurozone, UK and US. The UK Manufacturing PMI, as forecast, is a tad down on November, but shows that new business, production and jobs are all increasing solidly and at rates well above average. The UK manufacturing sector is still growing, albeit slower than the impressive highs seen in November. Lots of UK economic data has surprised to the upside of late, however, so there is still scope for a New Year bonus for the Pound. Sterling is, by the way, a little weaker than it was through most of December, but it has been volatile of late within some recognisable ranges.
The Eurozone Manufacturing PMI has once again posted close to record highs, with particularly strong performance in Germany, the Netherlands, Ireland and Australia. Business optimism in the sector across the Eurozone has also grown to a record high.
US data to dominate mid-week
Wednesday has a definite US slant to it, with the release of the minutes from the last Federal Reserve meeting alongside the Institute of Supply Management (ISM) Manufacturing Survey and the construction spending data. The forecasts paint a picture of slowing growth but it is still growth. The USD has been vulnerable lately, so weakness in the Dollar will ensue if the forecasters are right. Good news for buyers of the greenback but not so much for the sellers.
Service Sector results eagerly anticipated in the UK
Thursday brings the Service Sector PMIs. That is a very important sector for the UK and the forecasts are positive. So, if the mortgage lending and approvals data is also positive, the Pound should end the week on a high.
Beware potential for US and Canadian Dollar movement later this week
Friday starts with the Australian trade balance data, where an improved surplus is forecast; and then the day continues with a swathe of US and Canadian data, including the employment reports. The forecasts for the US data are a little downbeat, so beware, but further improvements in Canada’s employment levels and a potential fall in the unemployment rate could spark a bit of strength in the Canadian Dollar. It may be worth acting earlier in the week if you are a CAD buyer and like to avoid risk.
Easter eggs, anyone?
And, it is a standing joke that Christmas goods are on sale before Halloween but Tesco and the Co-Op have got Easter sweets on sale already. Give it a rest, guys. I have a Christmas belly to get rid of before we start that old nonsense.