Market Report: 20 March 2017
Among the highlights of last week’s economic data was Chinese industrial production which rose higher than expected up to 6.3% over the year to February. On the other hand, European Industrial Production rose 0.9% in January, a less encouraging figure which was short of expectations.
The UK employment data continued to show positive momentum in February as the claimant count fell more than expected, 90,000 new jobs were created and the unemployment rate dropped down to 4.7%. However, the rate of wage growth was still anaemic.
The Bank of England and Bank of Japan kept policy rate on hold as expected but the highlight of the week in the financial markets was the US Federal Reserve’s interest rate decision. Markets had priced in a 95% chance of a rate rise by 0.25% which is exactly what we got. Janet Yellen’s commentary was just as important as she stated that the Fed expects another 2 rate rises this year and three in 2018. She stated that the Fed saw resilient growth in the US and a good US jobs market. However, while saying that risks to inflation were “symmetric” she inferred that the Fed remains on guard if inflation picks up too fast beyond the 2% target. Earlier in the day, we had data showing that core inflation was hovering marginally below 2%.
For the upcoming week there are few significant macro data releases. On Tuesday, we have the latest UK CPI figures, economists expect that inflation rose by 1.7% compared to February last year. On Thursday, the UK Retail Sales data is expected to show that Britons spent 0.40% more in February compared to the previous month, and 2.6% more year-on-year. Finally, on Friday the EU Markit PMI will be released, analysts expect a slight increase in output up to 56.1 in March.
Author: Helal Miah, Investment Research Analyst