Not only is the UK not in recession, it even managed to eke out a tiny amount of growth in the fourth quarter, revised GDP data showed this morning. Of course, recent turmoil in the banks provides a strong argument against 50bps and may well prove enough of one to quickly end that debate. Markets are pricing a 25 basis point hike as a near-certainty and we could see expectations for 50 creep higher between now and then if the data doesn’t improve. The latter will remain a real concern for policymakers and ensure the tightening cycle will continue in May. Income and spending data didn’t contain any surprises either.Ĭore inflation remains a concern for the ECBĮurozone headline inflation fell considerably again in March – dropping from 8.5% to 6.9% – but ECB policymakers will not be celebrating a hard-fought victory as core inflation once again hit a record high at 5.7%. The obvious standout is the inflation data – and the Fed’s preferred gauge at that – which was within expectations and showed further stubbornness in price pressures. We have a wide selection of US economic data as well as more Fed speak which could hit sentiment again in the final hours of the week. Of course, there are other things that could blow this off-course. Investors’ willingness to carry risk into the weekend, considering how eventful they have been this month, is a strong signal that they believe the worst is now behind us. We saw quite the opposite a week ago, as a spike in Deutsche Bank credit default swaps triggered another sell-off in bank stocks which reverberated elsewhere as well. Confidence is easily shattered and difficult to restore and a positive end to the week would send a strong signal that investors are feeling reassured by the lack of turmoil recently.
If we end the week in the green, that’s a big deal considering how almost disastrous the rest of the month was. An action-packed end to the week, month, and quarter sees equity markets cautiously higher going into the weekend.
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